Why Importance of Money In Society.Money occupies significant place in all the branches of society, i.e., consumption, production, exchange, distribution and public finance. In the words of Marshall, “Money is the pivot around which the economic science clusters”. The truth is that money is one of the greatest inventions of mankind.
Every branch of economic activity in money economy is different from what it was in a barter economy. Money has influenced and facilitated all economic activities in the fields of consumption, production, exchange, distribution and public finance.
15 Importance of Money In Society;Everyone Must Study.
The significant role which money plays in the modern society will be clear from the following paragraphs:
1.Advantage to Customers:
The consumer can postpone his demand today if he desires so. If the consumer finds that the price of a particular commodity is high, he can postpone the purchase of that commodity till its price falls down to a more reasonable level.
2.Advantage to Producers:
Money helps the individual producer in a variety of ways, such as buying raw materials, borrowing capital, advertising finished products and in combining the various factors of production. Without money, these productive activities cannot be earned on with such efficiency and effectiveness.
- Possibility of Division of Labour:
Division of labour leading to specialization plays an important role in modern production. But both of them are simply not possible without the intervention of money.
- Facilitates Trade:
Money facilitates trade by serving as s medium of exchange. Rapid exchange of goods is possible in a modem economy because of money. Money constitutes the basis of the price mechanism through which the economic activities of the community are adjusted.
- Eliminated the Drawbacks of Barter:
The difficulties and the drawbacks of the old barter system have now disappeared as a result of the invention of money.
6.Mobility of Capital:
On account of the increased liquidity of money, capital becomes more mobile. It becomes possible to divert capital from less productive u.cs to more productive uses.
- Future Transactions:
future transactions have a special place in a capitalist set-up. In future transactions, the prices are settled in the present, but payments are made in future. This is done, because among all the commodities, money is the stablest in value.
8.Distribution of Rewards:
The rewards to various factors of production are distributed in terms of money. Rent, interest, wages and profits are all determined and paid to the factors of production in terms of money.
9.Public Finance:
The government receives its income from taxes, fees, duties, etc. and utilizes this income for administrative and development purposes. Without money, the functions of a modem state would become almost impossible.
10 Accounting& Budgeting:
Without money, efficient accounting and budgeting would become impossible. Money has enabled the individuals to make a rational choice between work and leisure, spending and saving, investing and hoarding.
11.Standard of Living:
The smooth and uninterrupted function of the money economy helps the society to raise its living standards by increasing overall production and through equitable distribution of wealth.
12.Social Welfare:
Social welfare can be measured through the medium of money. How much utility a particular person derives can only be measured in terms of money.
13.Material Progress:
The basis of modem material progress is industrialization, but this industrialization is not possible without capital accumulation and capital accumulation is possible only with the help of money.
14.Calculation of Economic Variables:
Money has made it possible to calculate and determine different macro-economic variables such as GDP, GNP & NI etc. It has created a new field of economic sciences. Money and finance management have now become equally important for multinationals and a sole proprietor.
15.Need of Government:
Money is perhaps the basic need of all the governments besides other people and institutions. Every government needs money to perform all its functions such as maintenance of law and order, defence expenditure, provision of justice, etc. Governments also need money to make huge payments like pension, gratuity and allowances etc.
