Валюта — это денежная единица, используемая на территории определенного государства. Она является фундаментальным элементом экономики любой страны, выполняя роль универсального equivalent value of goods and services. In other words, currency allows us to express prices in a form convenient for everyone, conduct purchase and sale transactions, evaluate assets and liabilities, save and accumulate capital.
Main functions of currency
Currency performs three key functions in the economy:
Measure of value
Currency serves as a convenient measure of the value of various goods. With its help, we can easily compare the cost of completely different goods and services. Thanks to this property, we can understand how much this or that good costs and how much more expensive or cheaper it is than others.
Means of circulation
Currency acts as a generally recognized intermediary in exchange. Instead of barter transactions in natural products, we use currency as a universal means of payment. This significantly simplifies and speeds up the turnover of goods. Sellers willingly exchange their goods for currency, and buyers pay with it, without thinking about the heterogeneity of goods.
Means of accumulation
Currency allows you to maintain purchasing power over time. We can put aside part of our income in the form of savings in currency to spend in the future. If the currency is stable, the accumulated amount will not depreciate and it will be possible to purchase approximately the same set of goods as at the time of receiving the income.
Currency classification
There is a wide variety of currencies that can be classified according to different criteria:
By status, currencies are divided into national (circulated within one country), foreign (currencies of other countries) and international (accepted for payment in many countries of the world, for example, the US dollar).
By exchange mode, there are freely convertible (exchanged without restrictions), partially convertible (exchange is limited) and non-convertible (not subject to exchange) currencies.
By form, there are cash (banknotes and coins) and non-cash (account entries) currencies.
By carrier — paper, metal and electronic money.
Interaction of people and organizations with currency
Currency is invisibly present in the life of every person and any organization.
People use currency to:
purchase goods and services;
receive wages, pensions, benefits;
pay taxes and fees;
save;
exchange for other currencies;
make money transfers.
invest and speculate in the currency market.
Companies encounter currency when:
conducting foreign trade transactions.
attracting foreign investment.
paying dividends to foreign shareholders.
opening currency accounts and deposits.
managing currency risks.
forming a currency portfolio.
influence of currency on the country’s economy
Currency is the circulatory system of the economy. The health of the entire national economy depends on its stability.
A strong currency:
makes the country attractive for investment;
allows you to accumulate reserves;
restrains inflation;
raises the standard of living of citizens.
A weak currency, on the contrary:
leads to more expensive imports;
weakens the purchasing power of the population;
stimulates capital outflow;
slows down economic growth.
Maintaining the stability of the national currency is one of the key objectives of the monetary policy of central banks.
Currency is an integral element of modern economic life. It performs the functions of a measure of value, a means of circulation and accumulation, thereby ensuring the smooth functioning of the market system. Currency plays a vital role in the life of every person, every company and the state as a whole, allowing for the exchange of goods, saving and investing capital, and developing domestic and international trade. Understanding the nature and mechanisms of currency is the basis of financial literacy in the modern world.
