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Characteristics of Money

The characteristics of good money which is willingly accepted are given below:

(1) Durability: Money must be durable and not likely to deteriorate rapidly with frequent handling. Bank notes, coins and cheques do not always pass this test to perfection. But they are certainly preferable to some perishable commodity.

(2) Weight: Money must be light in weight. From this viewpoint paper money is far better than metal coins. Because of their weight, coins are limited to small change, where weight is no serious drawback.

(3) Size: Money must be small enough to be easily carried on the person, but not to cause accidental loss. Very small gold or silver pieces were easily misplaced, on the other hand, large metallic coins presented real problem when big amount of money had to be transferred before bank money came into monetary use.

(4) Divisibility: Money must be readily divisible into various denominations to facilitate making change. Paper money and coins accomplish this task very well.

(5) To be accepted, money must be easy to recognize and familiar to most people. It avoids inconvenience and facilitates easy circulation of money. Gold, for instance, has the merit of cognoscibility.

(6) Stability in Value: If the value of money fluctuates violently, it will give rise to many economic and social problems, in that event money may lose its significance. Money should, therefore, be comparatively stable in value. The value of money in circulation remains scarce. The proper limits to the value of money are dictated by the needs of the economy and its stability depends largely on the centre coordination and regulation.