Money: Currency, Types, Uses and Example

Money is something that we use to buy our basic needs, shopping, etc. We give money in return for purchasing several items or any other things. Money is referred to as a medium of exchange, such as notes and coins, for commodities and services.

The Indian Rupee (currency symbol (₹)) is the national currency of India, and all the transactions are done by utilising the country’s system of money, i.e. the currency. Money is something that we all interact with daily, and we fall back on our maths skills to take care of money reliably.

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What is Money?

Money can be used as a medium of exchange, such as coins, notes, etc., to pay for services and commodities. When you purchase something, in return, you have to pay for anything like chocolates, cake, fruits, food, football, bat, racket, house, or anything that can be used for selling or buying, and we exchange money for those things. 

Money is used in the form of paper or coins and is usually issued by a government and generally used its face value as a method of payment for things. Economists determined money as the widely accepted means of payment which is also used for purchasing goods and services. 

Currency

A currency is the system of money used in a country, or we can say that a currency is a system of money in everyday use, especially for people in a nation. Money can be utilised in any form as a medium of exchange, specifically in circulating banknotes and coins. Each country has its value of the currency because different types of currencies are used in other countries like the U.S. have dollars \(\left({US\$ } \right),\) Euros \((€)\), Japanese have Yen \(\left( \text{¥} \right),\) and Pounds Sterling \(\left( \text{£} \right)\) are examples of currencies.

Functions

The first and the leading role of money is to function as a mode of exchange. Barter system’s deals become exceptionally tough in the large economy as of the high prices, and the people would have to sustain by looking for proper people to exchange their excesses or the surpluses.

We have two main functions of money, and they are:

1. Primary Functions and
2. Secondary functions.

These functions are further classified as:

Primary Functions

1. Medium of exchange: money can be utilised for the payments for all the transactions of goods and services. The buyer can purchase the goods through cash, and a seller can sell the goods for money.
2. Medium of value: Money is considered as the measure of value. The value of all the goods and services is displayed in terms of money.

Secondary Functions

1. Standard of deferred payments refers to money as a standard for making future payments. It has made deferred payments much more straightforward than earlier.
2. Example: When you borrow money from someone, you know that you have to return both the principal and the interest amount in the future.
3. Money is the most accessible mode of calculation and payment of interest amount that needs to be paid in the future. This function has facilitated borrowing and the lending process. It has also led to the forming of financial institutions.
4. Store of value: The store of matter implies the store of wealth. Money can be stored for our future use. It is the most convenient and economical means to hold the earnings and the wealth.
5. Transfer of value: Money also serves for the transfer of value. It facilitates buying and selling goods in the domestic country and other parts of the world.

Why is Money Important?

Money is not everything but is something essential. Beyond our basic needs, money helps us achieve our life’s goals and supports, which you care about most deeply, like family, education, health care, charity, adventure, fun, etc.

Types of Money

Coins: A small piece of metal that is flat, round, and authorised by a government is known as a coin. It is used primarily as a medium of exchange for money. They may have some images, numerals, or text on them. They are standardised in weight and are produced in large quantities

Notes: Notes are currency notes issued by the government—these notes are known as the paper money we pay in exchange for any goods or services.

Barter System: The exchange of goods with other goods is known as the barter system. The barter system was followed in the ancient days before the invention of money.

Plastic Cards: Plastic money is what we use a lot these days. The debit card, credit card, etc., all are known as plastic cards that we use to pay for any goods we purchase.

Electronic Money: It is another popular way that is used a lot these days. Online payments like using Google Pay, Phonepe, MobiKwik etc., all are known as electronic money that we use to pay for any goods or services we purchase or used for transferring money.

Cryptocurrency: A cryptocurrency (or “crypto”) is a digital currency used to buy goods and services but uses an online ledger with solid cryptography to secure online transactions. Most of the interest in such unregulated currencies is to trade for profit, with the speculators at times driving prices higher.

A cryptocurrency is a form of payment that can be exchanged online for goods and services. Many of the companies have issued their currencies, often known as tokens, and these can be traded specifically for the goods or services that the company provides. Imagine them as you would arcade tokens or casino chips. You’ll need to exchange real currency for the cryptocurrency to access the good or service.

Cryptocurrencies work using a technology called the blockchain. Blockchain is a decentralised technology spread across many computers that manage and records transactions. Part of the appeal of this technology is its security.

Use of Money in Maths and Life

Mathematics affects the financial decisions that we have to make every day in our lives. Math is a part of our everyday lives, from paying our bills to using the coupons at the grocery store. Number sense and a facility with mathematical concepts are very useful in banking. We use math for the purpose of budgeting, spending, saving, and investing.

Solved Examples

Q.1. Add 13 rupees 25 paise and 12 rupees 8 paise.
Ans: Express in terms of rupees and then add,
Express the paise in two digits and then add them like whole numbers.
\(13\) rupees \(25\) paise \(13.25\)
\(+12\) rupees \(8\) paise \(+12.08\)
\(25.33\) rupees
Hence, the required answer is \(25.33\) rupees.

Q.2. Subtract 16 rupees 25 paise and 12 rupees 10 paise.
Ans: Express in terms of rupees and then subtract,
Express the paise in two digits and then subtract them like whole numbers.
\(16\) rupees \(25\) paise \(16.25\)
\(-12\) rupees \(10\) paise \(-12.10\)
\(04.15\) rupees
Hence, the required answer is \(4.15\) rupees.

Q.3. Sachin bought a book for 59.25 rupees and spent 30.75 rupees for lunch. He had one 100 rupees note. How much money does he have now?
Ans: We have,
Sachin purchased a book for \(59.25\)
The amount he spent on lunch \(+30.75\)
The total amount spent \(90.00\)
rupees Now, subtract to find the balance He had one \(100\) rupees note \(100.00\)
Total amount spent \(-90.00\)
Difference \(10.00\)
Hence, the balance left over is \(10\) rupees.

Q.4. The cost of a pen is 29.50 rupees. Find the cost of four pens?
Ans: One pen cost \(29.50\) rupees and four pens cost \( = ?\)
Here we will multiply the numbers \(29.50\) by \(4\)
The cost of one pen is \(29.50\)
The cost of four pens is \( \times 4\)
The cost of four pens in rupees is \(118.00\)
Hence, the cost of four pens is \(118\) rupees.

Q.5. Deepika bought three dresses for 699.90 rupees. Kirti bought two dresses of the same type and gave a 500 rupees note to the shopkeeper. What change did she get back?
Ans: We have,
Cost of three dresses \( = 699.90\) rupees
Cost of one dress \( = 699.90 \div 3\)
\( = 233.30\) rupees
Cost of two dresses \( = 233.30 \times 2\)
\( = 466.60\) rupees
Balance received by Kirti \( = \left({500 – 466.60} \right)\) rupees
\( = 33.40\) rupees.
Hence, the amount the shopkeeper gave to Kirti is \( 33.40\) rupees.

Summary

In the given article, we have discussed money and currency. We have talked about the functions which include primary function and then secondary function that further classified as the medium of exchange, medium of value, standard of deferred payments, store of value and transfer of value. We glanced at the importance of money followed by types, the uses in math/life. We have provided solved examples and also a few FAQs.

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FAQs

Q.1. What is money, and why it is important?
Ans: Money can be used as a medium of exchange, such as coins, notes, etc., to pay for services and commodities.
Beyond our basic needs, it helps us achieve our life’s goals and supports, which you care about most deeply, like family, education, health care, charity, adventure, fun, etc.

Q.3. How is money used today?
Ans: The types of money used today are coins, paper currency, bank drafts, money orders, stocks, cheques and many more. Money is converted into two ways, that is commodity and fiat.

Q.4. What is the advantage and disadvantage of money?
Ans: There are many advantages and disadvantages of money, but we have listed a few that are given below:
Advantages: The few benefits of money are money gives youdom. When you have enough money, you can live wherever you want, take care of your needs. Money gives you the power to pursue your dreams, and money gives you security.
Disadvantages: We need to understand how to use the money properly, as there are few weaknesses of the money are: Instability, overcapitalisation, misuse of capital, black money etc.

Q.5. What are the five functions of money?
Ans: The five functions are as given below:
1. Medium of exchange
2. Medium of value
3. Standard of deferred payments
4. Store of value and
5. Transfer of value

We hope this detailed article on the concept of money helped you in your studies. If you have any doubts, queries or suggestions regarding this article, feel to ask us in the comment section and we will be more than happy to assist you. Happy learning!