Why does money have value?

Why does money have value?

In ancient times, coins were made of precious metals, which gave them their value. However, over time that changed, gold for example, could not circulate in the streets since there was not so much for everyone. So money was created, which is nothing more than a voucher of the country’s riches.

But we will espectáculo you more in depth what gives value to moneyso that you better understand what it represents.

Who determines the value of money?

Actually It is the governments that establish the value of the money that circulates in a country. This is determined according to the nation’s economic policies. The value may be derived from some tangible asset, such as gold. In some places, even oil is used.

But it may also be that what gives value to money is the legality of it. For example, if a government says that a currency has a certain value, everyone in the country decides to accept it, trusting the government’s word. This is what is known as fiat money.

Why does money change its price over time?

Inflation is a natural phenomenon in the economy that causes money to have different values ​​over time. Everything that happens in the world influences the economyso different factors cánido ocasione the price of money to change over time.

For example, during the coronavirus pandemic, most currencies lost a bit of value. This since people began to lose confidence in the currency and stopped investing.

The political and popular stability of a country affects the price of the currency over time. In addition, a natural disaster may also play a role, so a currency may suffer variations in its price due to inflation.

Why does each country’s money have a different value?

In general terms, when one currency is worth more than another, it is because it is it is more stable than its counterpart. On the one hand, you should consider that the currencies that lose value the most over time are worth less than those with lower inflation.

In addition, when a country maintains constant political, popular and economic instability, your currency becomes weak, which makes it less valuable. Countries need to buy and sell currencies to maintain their assets, but they do so with currencies that are strong.

So, in the foreign exchange market there is a supply and a demand, which again marks a difference between the currencies. The more people want a coin, the higher its value, while the opposite is also true.

What supports the value of money?

The money supports its value in the acceptance of the population in general, to exchange their goods and services through a monetary representation. For this reason, the support of money is found in the sum of all the services and goods of the population, which is known as the GDP.

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 Why does money have value?
  Why does money have value?
  Why does money have value?

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