Money: Store of Value

As elaborated in article titled “Money”, money is an intermediate that makes commerce possible. For transactions to be settled in cash i.e immediate exhange of goods and services with money, it has to preserve its buying power, over the period it is acquired and when it is spent. Money can preserves its buying power if it becomes a store of value.

Money can be a store of value if it has intrinsic value like salt, cattle etc or its value is enforced by a social institution which guarantees its purchasing power. Money as salt, cattle is perishable , its value is determined by various factors, and has practicle limitations on its divisiblity, transport, transfer. Hence in modern times money is a promissiory note that promises the bearer the sum of money written on note. The issuer, government through central bank guarantees that no person can refuse to accept the note for settling payment within the country and allows citizens to pay taxes, levies, fine etc. This gives money universal acceptibility in a country which gives it value.

Money is used to settle trades of goods and services. The amount of goods and services produced in a country can go up or down hence money supply has to go increase or decrease with goods and services exchanged in a country to maintain its value.