Money and its Functions

Money has four functions: a medium of exchange or means of payment, a store of value a unit of account and a standard of deferred payment. When used as a medium of exchange, money is considered to be distinguished from other assets.

Money as the medium of exchange is believed to be used in one half of almost all exchange. Workers exchange labour for money, people buy or sell goods in exchange for money as well.

People do not accept money to consume it directly but because it can subsequently be used to buy things, they wish to consume. To see the advan­tages of a medium of exchange, imagine a barter economy, that is, an economy having no medium of exchange. Goods are traded directly or swapped for other goods. The seller and the buyer each must want something the other has to offer. Trading is very expensive. People spend a lot of time and effort finding others with whom they can make swaps. Nowadays, there exist actually no purely barter economies, but economies nearer to or farther from the barter type. The closer is the economy to the barter type, the more wasteful it is. Serving as a medium of exchange is presumed to have for centuries been an essential function of money.

Foreign Trade

What is now called international trade has existed for thousands of years long before there were nations with specific boundaries. Foreign trade means the exchange of goods and services between nations, but speaking in strictly economic terms, international trade today is not between nations.

Goods can be defined as finished products, as intermediate goods used in producing other goods, or as agricultural products and foodstuffs. International trade enables a nation to specialize in those goods is can produce most cheaply and efficiently and it is one of the greatest advantages of trade On the other hand, trade also enables a country to consume more than it can produce if it depends only on its own resources. Finally, trade expands the potential market for the goods of a particular economy. Trade has always been the major force behind the economic relations among nations.

Different aspects of international trade and its role in the domestic economy are known to have been developed by many famous economists. International trade began to assume its present form with the establishment of nation-states in the 17^th and 18^th centuries, new theories of economics, in particular of international trade, having appeared during this period.

Organized Produce Markets (I)

As explained above, the market for certain commodities are worldwide. Moreover, many of these commodities arc in constant demand, either as basic raw material or as main foods or beverages for a large section of the world's people. England's foreign trade began with the export of raw wool in the thirteenth century, and it was extended by the subsequent development of the chartered companies. These were based in London, and it was there that merchants gathered to buy and sell the produce, which the companies’ ships brought from abroad.

The big change, however, came about with the expansion of International trade following the industrial revolution. The UK became the greatest importing and exporting nation in the world. London, her chief port and commercial city, not only imported the goods which were required for the people of her own country but built up an important business, acting as a go-between in the distribution of such commodities as tea, sugar, hides, skins and wool to many other countries, particularly those of western Europe. Hence formal ‘organized markets' developed.