A COMPARISON BETWEEN MONEY AS MEDIUM OF EXCHANGE AND MONEY AS A COMMODITY

Abstract

This paper attempts to investigate the role of money as a medium of exchange and as a commodity. In the earlier period, money was backed by one hundred percent reserve of gold or silver. It implies money had intrinsic value and the currency backed by gold and silver helped reduce inflation, encourage the effective establishment of wealth and stabilize the domestic economy. Money, having the quality of exchanging goods and services, is fiduciary by nature. This
quality of money is characterized within a nation and between nations. The problems created due to the fiduciary nature of money are nominal as well as real. In such situations, it is difficult to determine whether or not the value of money remains the same under different circumstances. Due to this reason, there is a difference between money as a medium of exchange and money as a
commodity. This difference is based on its use, demand, marginal utility, size, shape, color and others.