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What is the most important quality of good money?

An ideal money material should possess the following qualities: General Acceptability: Portability: Indestructibility or Durability: Homogeneity: Divisibility: Malleability: Cognizability: Stability of Value:

economicsdiscussion.net - Top 8 Qualities of an Ideal Money Material - Economics Discussion

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Top eight qualities of an ideal money material are:

1. General Acceptability 2. Portability 3. Indestructibility or Durability 4. Homogeneity 5. Divisibility 6. Malleability 7. Cognizability 8. Stability of Value!

An ideal money material should possess the following qualities:

1. General Acceptability:

It is the very essence of money. Unless a person knows that the money which he accepts in exchange for his goods or services will be taken without any objection by others as well, he will not accept it. It will cease to be current. In order to possess general acceptability, a commodity should have some intrinsic utility independent of its value for monetary purpose. Gold and silver are generally acceptable to all without any hesitation because they are used for ornamental and other purposes and can be easily sold as bullion, besides being used for monetary purposes.

2. Portability:

A commodity fit to be used as money must be such that it can be easily and economically transported from one place to the other. In other words, it must possess high value in small bulk. Precious metals possess this quality. In the case of oxen and grain, a small value occupies a large bulk and weight; hence, they are unsuited as money commodity.

3. Indestructibility or Durability:

As money is passed from hand to hand and is kept in reserve, it must not easily deteriorate, either in itself or as a result of wear and tear. “It must not evaporate like alcohol, nor purely like animal substance, nor decay like wood, nor rust like iron. Destructible articles, such as eggs, dried cod fish, cattle or oil has certainly been used as currency; but what is treated as money one day must not soon afterwards be eaten up.” Gold coins are very lasting; they take about 8,000 years to wear out completely. Silver coins are not equally lasting but wear out fairly slowly. As such gold and silver are considered to be excellent money commodities.

4. Homogeneity:

All portions or specimens of the substance used as money should be homogeneous, that is, of the same quality, so that equal weights have exactly the same value. In order that a commodity may be used as a measure of value, it is essential that its units are similar in all respects. Gold and silver are of the same quality throughout; their various parts are similar in chemical and physical composition and their consistency is the same throughout the mass.

5. Divisibility:

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The money material should be capable of division; and the aggregate value of the mass after division should be almost exactly the same as before. If we use diamond as money and by chance it drops from our hand and breaks, we will suffer an enormous loss. This is not the case with precious metals. Their portions can be melted and remelted together any number of times without much loss.

6. Malleability:

The money material should be capable of being melted, beaten and given convenient shapes. It should be neither too hard nor too soft. If the former, it cannot be easily coined; If the latter, it would not last long. It should also possess the attribute of impressionability so that it may easily receive the impressions.

7. Cognizability:

By it, we mean the capability of a substance for being easily recognised and distinguished from all other substances. As a medium of exchange, money has to be continually handed about; and it will cause great inconvenience if every person receiving it has to scrutinise, weigh and test it. It should have certain distinct marks which nobody can mistake. Gold and silver are at once recognised by their distinctive colour, metallic and heavy weight for small bulk, and, as such, satisfy this condition admirably

8. Stability of Value:

Money should not be subject to fluctuations in value. Fluctuating standard of value is just like a changing yard or kilogram. The value of a material, which is used to measure the value of all the other materials, must be stable. The ideal money commodity should, as such, possess utility, portability, durability, homogeneity, divisibility, malleability, Cognoscibility and stability of value.

economicsdiscussion.net - Top 8 Qualities of an Ideal Money Material - Economics Discussion

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