Top 10 Advantages of Money – Explained!

Read this article to learn about 10 Advantages of Money!

The main advantage of money is that it removes all the difficulties of the barter economy.

We may thus mention the following advantages of money:

(i) It renders double coincidence of wants unnecessary. It thus facilitates exchanges and the satisfaction of wants.

(ii) It provides a common measure of value. It thus gives a precise idea about the relative value of commodities.

(iii) It is capable of sub-division. As such it helps in the completion of even minute transactions which is great gain to society.

(iv) It serves as a convenient store of value.

(v) As a very desirable goal, money spurs all economic activity. It is sometimes said that money is only a medium of exchange and merely saves us from the difficulties of barter; that the object of production is not money but satisfaction of wants; and that we labour to acquire money not for its own sake but as a means to satisfy wants. These statements are certainly true. But the ordinary businessman or manufacturer does not think of money in these terms. For instance, a cloth manufacturer does not make cloth with the aim of social service that people may cover themselves, but that he may earn profits. He pays wages to his labourers, not for the reason that they may satisfy their wants but only because these payments are necessary for his profits.

Money is the real object of all his activities. He is constantly thinking of ‘money costs and money incomes, money gains and money losses.’ Hence, ‘making money’ is the goal, not making cloth, the same is the objective of everybody, be he a trader, businessman, shopkeeper, government servant or a labourer. Money is thus the central point of all economic life today.

(vi) Money and prices determine the total amount of material goods that a salaried man or a wage-earner can consume.

(vii) The modern economic system with its division of labour and large- scale production would have been impossible without the use of money. Huge sums of money, borrowed and loaned, make international trade and transport possible, and provide us with most of the goods we consume. All this would be impossible in the absence of money.

(viii) Money represents general purchasing power. It gives its possessor a claim on goods which he can purchase in a form and at a time most convenient to him. In this way, a consumer is able to maximise his satisfaction. A producer is able to maximise his profit, since money enables him to organise a most economical combination of the factors of production and helps him to buy and sell profitably.

(ix) Money is beneficial to society in general, since on a small basis of cash, a vast superstructure of credit can be built up.

(x) Optimum distribution of community’s resources would have been impossible without the use of money. Thus all types of waste are eliminated and welfare of the community maximised.