How does money get its value?

Question

what are the contributing factors

Answer 1

Bob,

The main factor is that it is a medium of exchange and that the relevant government will accept it in payment of debts especially in modern economies.

In economics, there are various definitions for money, though it is now commonly considered to be any good or token that fulfills the money functions: to be a medium of exchange, store of value, and unit of account.

Some authors explicitly require money to be a standard of deferred payment, too . In common usage, money refers more specifically to currency, particularly the many circulating currencies with legal tender status; deposit accounts denominated in such currencies are also considered part of the money supply.

Answer 2

While money evolved as a system of exchange, as a paper document backed by commodities like gold or silver, nowadays, all over the world, we have what we call the fiat money. this means that the currency is not backed by any commodity, but gets its value from the backing of the reserve banking or central banking authority of the country which pegs the value of the currency at the rate and promises the bearer that the currency will be of the said value.

God Knows Best
Jaleel mohammed jalaludeen

Answer 3

It starts by getting a new face lift every so often, and putting famous quotes on it to appear as though it values knowledge.

Really money will always be nothing but a game grown men and women play.

They can dig up all the gold they want but one day they will run out. So they can keep what they eventually get, but i doubt it. The greedy will get tired of not being able to get richer. Money will perish.

Answer 4

It is controlled and evaluated by the government and finical institutions as well as the the public through the supply and demand situation -- exchange rate, purchase power in the market and whatever function it enables the barer to exercise.

For example:

Government set a minimum wage for hourly labor.

Interest rate set by banking systems around the world for the associated currency.

TAX raised for sales, income, property, licenses.

You thinking food is worth a value and willingly give up a certain amount for a meal.

Answer 5

Demand for a good arises from its perceived benefit. For instance, people demand food because of the nourishment it offers them. With regard to money, people demand it not for direct use in consumption, but in order to exchange it for other goods and services. Money is not useful in itself, but because it has an exchange value, it is exchangeable in terms of other goods and services. Money is demanded because the benefit it offers is its purchasing power, i.e., its price.

Consequently, for something to be accepted as money it must have a pre-existing purchasing power, a price. So how does a thing that the government proclaims will become the medium of exchange acquire such purchasing power, a price?

We know that the law of supply and demand explains the price of a good. Likewise it would appear that the same law should explain the price of money. But there is a problem with this way of thinking since the demand for money arises because money has purchasing power, i.e., money has a price. Yet if the demand for money depends on its pre-existent price, i.e. purchasing power, how can this price be explained by demand?

We are seemingly caught here in a circular trap, for the purchasing power of money is explained by the demand for money while the demand for money is explained by its purchasing power. This circularity seems to provide credence to the view that the acceptance of money is the result of a government decree and social convention.

Answer 6

If we were invaded by another country and they took over our whole country our money would be worthless overnight......
so the value of money is only a perception.... which is why when there are wars people do not store money... instead they store gold, diamonds, paintings, jewelery and other gem stones.

Answer 7

It used to be with the amount of gold kept in the country, but now it's alot more complex. It's a system of confidence the people have in that countrie's money. It's evaluated the same way as stocks are. What people are willing to pay for it.

Answer 8

time value of money: money in hand today is worth more than money expected tomorrow. money value of time: time wasted is time that could be used to generate income.

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Answer 9

you know i have only learned my whole life that "money is important. and people luv to have a lot." but i know that yeah you need money but then i start thinking it is just paprer or cloth like material, and coins. and it is all thought up by man kind so we created this mess of not having enough and wanting more. but it will always be like that so. i don't care. i know that well it is kinda important to have money in order to support yourself and others. but im sorry i didn't answer your exact question. i know i got carried away. sorry.

Answer 10

it is done by agreement..as are gemstones..gold and silver, ect. In all actuality..they have No value..unless some organization places such upon it...