Money, Purpose and Function Essay

In this paper, Team C will explain the purpose and function of money. Money is considered to be a heavily thought about issue. The religious people say “money” is the route of all evil. The rich lose their minds when they lose their money. The poor people spend money on lotteries and gambling in the attempt to become rich. The few people who win the ‘Big Payoff’, and they are few and between, are soon poor again because they do not know or understand how to handle money and make the money work for them.

The definition of money is described by how people are commonly keen to accept as a reward for services produced or compensation of services owned (Hubbard & O’Brien, 2010). Assets are commonly defined as important possessions owned by a person or a firm (Hubbard ; O’Brien, 2010). If 100 different people are asked what is the purpose or function of money, the result would receive at a minimum 50 different answers. It perceived in many situations how some people will use money to manipulate people and situations in their favor.

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Some people have just enough money to live on until the next paycheck arrives, and some have just about enough to juggle and pay their bills bi-monthly. Reported instances were published describing people who must have the best everything. The best cars, Cadillac Escalades, Mercedes; the name brand clothes and purses, Doonie and Burke, Jones of New York, the homes in excess of one half million dollars. In another note, some people either aggressively save money, invest their money, or gamble in the attempt to increase their balances.

The way of the past to obtain needs and wants was to trade or barter one item for another. It seemed that nothing was off limits to trade. When someone was seen with something that a person needed, clothes, food, tools, animals, transportation, or anything that was thought of, the inquirer found what the owner of those items required among the items in possession. Some cases were affected by individuals who may not have what they need, but were aware of where to find it. As a result, there would be a multiple trade to allow the opportunity to obtain the item originally needed.

Prior to the introduction of money as a form of compensation as payment for work, different items were received for compensation. Some received housing; some of the farmers received a portion of the crops they grew. The first governor of Tennessee was awarded compensation of 1000 deerskins for a year and the Secretary of the Treasury was awarded 450 otter skins as their yearly salary (Hubbard & O’Brien, 2010). As an elected official, today’s elected officials receive about $155,000. 00 and the salary of the secretary of the treasury is $191,300 (home-v. i. p. alaries, 2011).

Compensation for services should satisfy the exchange, measurement of unit value, a recognized form of exchange, and settling of any debt (Hubbard ; O’Brien, 2010). Team C understanding of the different kinds of compensation and how money flow is tendering to purchase an item has to have a value. Values vary from one person to another. Unit of account is the counting of an item, if it is a dollar, it is $1, four quarters, ten dimes, and each is a unit. Standard of deferred payment is defined as the normal mode of payment for a particular good or service.

In today’s market standard of deferred payment is credit. The Federal Reserve is the monetary authority of the United States of America. A policy used to describe two functions Team C will discuss are expansionary and contractionary, which is referred to as the Monetary Policy (Federal Reserve Bank of San Francisco, 2010). The expansionary policy expands the complete delivery of money in the economy hastily than usual (Federal Reserve Bank of San Francisco, 2010). Contractionary policies expand the money flow more slowly than usual or make it deflate (Federal Reserve Bank of San Francisco, 2010).

Expansionary policy is conventionally implemented to combat unemployment during a recession by reducing interest rates in the expectation that easy credit will entice the increase of money flow into businesses (Federal Reserve Bank of San Francisco, 2010). Contractionary policy is planned to reduce the rate of inflation in hopes of avoiding distortions and worsening of asset importance (Federal Reserve Bank of San Francisco, 2010). The Federal Reserve Bank is the main hub of banks the United States. The Federal Reserve or Central Bank attempts to balance the flow of money and credit.

The central bank is supposed to ensure that the money and credit is not off balance; not too much of a free flow and not too little flow. Money and credit flowing too freely will crash business because of their inability to maintain supply and demand. A prime example of this happening was approximately March 2005 concerning the housing market. Builders went crazy increasing the price of homes, and the lenders went crazy giving home loans to people who could not afford or qualify for the amounts given. If money dries up, as it has in the last three years, again with the housing market, a recession occurs.

People have lost jobs, homes, and vehicles due to over extension of credit. The Federal Reserve carries out monetary policy hopefully to balance the two extremes to maintain prices of goods and services, the employment rate, and factories production levels high (Federal Reserve Bank of San Francisco, 2010). In conclusion, we value money, the dollar bill, for the purposes we can do with it. However, prior to the invention of the dollar, people could acquire items. Oversight was very minimal on the economy, and the way items were exchanged. The majority of people were honest, and a handshake was needed to seal a deal. Trading and negotiating did not destroy our country. The introduction of the dollar can destroy our country in a short time, and cause a domino effect of loss.

References

Federal Reserve Bank of San Francisco. (2010). httop://www. frbsf. org/publications/federalreserve/fedinbrief/central. html. Retrieved from http://www. frbsf. org Hubbard, R. G. , & O’Brien, A. P. (2010). Economics (3rd ed. ). Boston, MA: Pearson Hall. home-v. i. p. salaries. (2011). Paywizard. org. Retrieved from http://www. paywizard. org/main/vip/paycheck/salaries-president-obamas-administration