There is no doubt that money facilitates and motivates all economic activity relating to consumption, production, exchange and distribution. Money enables a consumer to maximize his satisfaction. Money measures the intensity of desire and the utility of a commodity to a consumer. Money facilitates production by stimulating saving and investment. It gives mobility to capital and helps in capital formation. It enables the harnessing of various factors of production, so that the entrepreneur is able to maximize his profit. The introduction of money facilitates exchange and helps in the development of trade and commerce, both national and international. Money functions as a common denominator for the distribution of social products. It is in terms of money that wages, rent, interest and profits are determined. Money helps the price mechanism to operate, and serves as an instrument for the allocation of resources among competing uses. Money is an extremely valuable social instrument, which has largely contributed to the growth of national wealth and social welfare. It has ensured the smooth functioning of the economic system. It has accelerated the process of industrialization. In a money economy, there is a continuous flow of money payments. This circular flow is essential for promoting economic welfare. Whatever the type of economic system, money is found to be of great service. In a capitalist economy, money plays an important role because capitalism basically depends on price mechanisms, which operate through the medium of money. The existence of a monetary economy helps society to discover what people want and how much they want, to decide what shall be produced and in what quantities, and to make the best use of its limited productive power. And it helps each member of society to ensure that the means of enjoyment to which he has access yields him the greatest amount of actual enjoyment that is within his reach. |
