Here is a term paper on ‘Money’ for class 11 and 12. Find paragraphs, long and short term papers on ‘Money’ especially written for commerce and management students.

Term Paper on Money

Term Paper Contents:

  1. Term Paper on the Definition of Money
  2. Term Paper on the Nature, Features and Characteristics of Money
  3. Term Paper on the Functions of Money
  4. Term Paper on the Defects and Drawbacks of Money
  5. Term Paper on the Role, Importance and Significance of Money in Modern Economy
  6. Term Paper on the Value of Money

Term Paper # 1. Definition of Money:

Money may be any commodity chosen by common consent as a medium of exchange. It is expected in payment for goods and services and in settlement of debts. It is given and received without reference to the person who is using it. For instance, a rupee note is a rupee note whether it is used by the President of India or by a blind beggar in the street.


“The real significance of money is that it is a claim which can be used by its owner to buy anything.” – A.C.L.Day

“Anything that is, commonly used and generally accepted as a medium of exchange or as a standard of value”. – Raymond P. Kent

“Thing which possess general acceptability”. – Seligman

“Anything which is widely accepted in payment for goods, or in discharge of other kinds % business obligation.” – Robertson


“Money can be defined as anything that is generally acceptable as a means of exchange (i.e., as a means of settling debts) and that of the same time acts as a measure and as a store of value”. – Crowther

In short, it can be said that money is any commodity which is generally accepted as a medium of exchange, standard of value, store of value and a standard of deferred payments.

Anything which is used as money should have the following features:

1. It should pass from hands to a hand that is; it should be received regularly with the idea of offering it in payment to others.


2. It should be used to buy and sell all goods and services.

3. It can be anything—a useful or useless commodity, a metal (like gold or silver), a piece of paper (e.g., a currency note).

4. It should be used to buy or sell all goods and services.

Term Paper # 2. Nature, Features and Characteristics of Money:

Features and characteristics of money are as follows:

1. Money acts as a store of value.

2. Money facilitates exchange.

3. Money is also used as standard of value.

4. Money facilitates deferred payments.

5. Money in any commodity have general acceptance.


6. Money has generalised purchasing power.

Term Paper # 3. Functions of Money:

In the views of Crowther, “the only essential requirement of money is general acceptability”. According to Walker, “Money is what money does”. Money is known for what it does or performs.

Money was introduced to overcome the difficulties of the barter system and to help in exchange.

The functions of money can be summarized by the following points:


1. Money is a standard for measuring values.

2. Money serves as a medium of payment.

3. Money as a means of a transferring value.

4. Money is used as a store of value i.e., it keeps the resources liquid.


5. Money as a medium of exchange.

6. Money serves as a standard for deferred payments.

1. Money is a Standard for Measuring Values:

When money serves as a medium of exchange, it incidentally measures the value of things for which it is exchanged. One inconvenience of barter was the lack of common measure or a common denominator of value in terms of which other values could be expressed and added and accounts kept. Money removes this difficulty too. Money serves as a unit of account.

In a money economy, it is easy to compare the relative values of commodities and services which are dissimilar and entirely different from one another. The values are in proportion to their respective prices. Expression of value in prices enables us to add them up and have a definite idea of person’s or a community’s wealth. In matters of exchange, a common standard of value makes the transaction easy and also fair.

2. Money Serves as a Medium of Payment:


Money is a medium of payment, that is, it is used to make and receive all payments. A commodity is bought and sold with the help of money and it is also paid for in money. The function of money as a medium of payment is implied in the above function of money as a medium of exchange.

3. Money as a Means of Transferring Value:

There is also another function which money performs. One can sell one’s immovable and movable belongings at one place and with the money so acquired he can buy them elsewhere, value will then be transferred. Such things have happened on a very large scale in India after the partition of the country.

4. Money is used as a Store of Value i.e., it Keeps the Resources Liquid:

Money serves as a store of value or more correctly i.e., enables a person to keep a portion of his assets liquid. Liquid assets are those which can be used for any purpose at any time one likes. Most persons in the modern world have to keep currency notes in their packet or at home, or they may keep current accounts with the banks withdrawable by cheque.

The necessity arises from the fact that the two streams of income and expenditure do not keep time with each other. An employer has to pay wages, etc., periodically; even daily, while his income does not come to him in the same periodical intervals. Money is best kept as a store of value to be used as and when need arises.


5. Money as a Medium of Exchange:

The first and the most important function of money is to help in buying and selling of goods and services. Commodities are not exchanged directly but are exchanged through money. In case of farmer, the farmer sells his produce in the market for money.

He uses this money to buy clothes, pulses, rice, matches, sugar and other things which he requires. A teacher who sells his services to the college for money; he uses his money to buy all kinds of goods and services which he requires. Thus, money is the medium of exchange or medium of trade.

6. Money Serves as a Standard for Deferred Payments:

Money helps us to buy goods and services not only in the present but also in the future. Suppose a person buys a pen from a shop and pays him money immediately. This is cash transaction. Suppose, instead, he buys a pen now and agrees to pay later it becomes a credit transaction. Further, if a person borrows from a money-lender and agrees to return the amount later, it is also credit transaction. Money helps to buy and sell or borrow and lend. In other words, money serves as a standard of deferred payment.

Term Paper # 4. Defects and Drawbacks of Money:


Though money plays an important and essential part in the economy of a country, it would be wrong to conclude that money is the cause of all economic changes and progress. Money is only an instrument which helps in economic progress but it is not the controlling authority. Money is a good servant but a bad master.

Money can be proved dangerous in several ways:

1. Money leads to corruption.

2. Money leads to inequalities of incomes.

3. Money has instability.

1. Money Leads to Corruption:


Money has been responsible for all the corruption which is prevalent in modern society. As Ruskin stated, “The devil of money has come to possess their souls. No religion or philosophy seems to have the power of driving it out”. Money is regarded as the cause of theft and murder, of deception and betrayal. It is the lust for money which induces man to go for illegal and dubious means of accumulating money.

2. Money Leads to Inequalities of Incomes:

Money has proved to be a very convenient tool for amassing wealth and of the exploitation of the poor by the rich. It has created a yawning gulf between the ‘haves’ and the ‘have nots’. The misery and degradation of the poor is thus, to no small measure due to the existence of money.

3. Money has Instability:

A very great defect of money is that its value or purchasing power does not remain stable or constant. Different sections of people in the country are affected differently because of changes in the value of money. For instance, a fall in the value of money (inflation) leads to wrong distribution of income since the rich become richer while the poor becomes poorer. A rise in the value of money (deflation), meaning a fall in prices and decline in employment may lead to great suffering to all classes of people.

Term Paper # 5. Role, Importance and Significance of Money in Modern Economy:

There is no doubt that money facilitates and motivates all economic activities relating to consumption, production, exchange and distribution. Money enables a consumer to maxi­mize his satisfaction. Money measures the intensity of desire and the utility of commodity to a consumer.

The role and significance of money in modern economy can be summarized by the following points:

1. Significance of Money in Production:

Without money, production on the modern scale would be impossible. The present day industrial production is based on extreme division of labour or specialisation which implies that the worker cannot be paid in the commodity he produces and also the existence of the extensive market to dispose of commodity. It is money which has made possible the extreme specialisation and, therefore resulted in large-scale production.

Again, money enables every man to concentrate his attention on his own job, without bothering about all other things and thus to add more effectively to the general flow of goods and services which constitute the real income of society.

It is clear, therefore, that without money, modern specialisation is impossible and without specialisation modern capitalist economy could not have come into existence.

The manufacturers use money to purchase materials for the construction of their factories, they use it to buy the materials necessary for their equipments. They bid competitively in the markets of the world for the raw materials used in the process of manufacturing. They employ money as a means of attracting to their business the requisite labour force, officials and professionals.

2. Significance of Money in Consumption:

The consumer receives his income in the form of money, which he can convert into anything he likes. A worker in a cloth factory cannot be paid in a cloth or an employee in a shoe factory in shoes. It is impossible for workers to go about exchanging cloth or shoes for rice, wheat, vegetables and hundreds of old things they require. When payment is made in kind (and not in money) there is high possibility that the consumer gets too much of some goods and too little of others.

The consumer, therefore, does not get maximum satisfaction in the absence of money. On the other hand, when the consumer receives his income in the form of money, he can distribute it on the different goods in such a way that his total satisfaction will be highest. The use of money and the system of prices give the consumers the necessary freedom to choose and substitute between goods and services.

It is the system of money and prices which help the consumers to:

(a) Choose the type of goods they consume;

(b) The variety of goods they can choose; and

(c) The amount which they could choose.

3. Money as Medium of Exchange:

One important reason why money occupies a central position in a modern economy is the function of money as a medium of exchange, and of payments. Everything can be bought and sold, i.e., exchanged through the medium of money. Goods and services are exchanged through money. Shares and bonds (which are known as claims to wealth) are bought and sold in the form of money.

Similarly, taxes to the government are paid in money. In other words, money is used as the general medium of exchange and of payment. Without it, there can be no trade and, therefore, no production. (In modern economy, there can be no production, if what is produced cannot be sold).

4. Significance of Money to the Modern State:

The government is a large receiver as well as maker of payments. The state receives income by way of taxes, fees, fines, prices for service rendered etc. The income which the states get may be one-third or one-fourth of the total national income. It is impossible to collect taxes, fees, fines, etc. in the forms of goods.

The farmer would pay in grains the cobbler in shoes, the carpenter in chairs and tables; and so on. This would create problems of collection, storage or distribution. Similarly, the government has to make payment by way of wages, salaries, interest, etc. This would be impossible except in terms of money. Public revenues and public expenditures are so vast that they are possible only in a money economy.

Moreover, modern governments plan their incomes and expenditure in advance. This would not be possible if they collect their revenue to kind. Revenues received in goods and payments made in kind would make calculation and budgeting an impossible task.

5. All Incomes are in the Form of Money:

All incomes that are received are in the form of money. This necessarily follows from the fact that money serves as a general medium of exchange and of payments in settlement of debts. The firms which sells its goods, receives money for it; its income, therefore, consists of money.

The lecturer who sells his services to the college gets his salary in the form of money. Since all payments are made in money, every income is a money income (payment by one person becomes income for another). Thus, in a modern economy, all incomes are money incomes.

6. Significance of Money in Trade:

The basic purpose of money is to help in the exchange of goods and services (i.e., trades). In a primitive economy, there was very little trade. Naturally, the system of exchange was barter. With extension of trade, the need for money rises. Large scale production and extension of markets to sell the goods produced are impossible without the use of money.

In the last two hundred years, trade has become very extensive and to facilitate this, new types of money have been involved. The use of bank cheques and bank drafts facilitates buying and selling of goods as well as of payments.

Not only internal trade, but international trade too is possible only through money. The currency of one country may be acceptable in India but cannot buy even a match box in England or the U.S.A. However, trade between two countries is financed by means of bank drafts.

Trade, both internal and international, is very important and indispensable for modern large-scale production. Money is the medium by which trade is undertaken. If there were no money, there would be no extensive trade; if there were no trade, there would be no large-scale production and no modern capitalist economy.

7. Wealth kept Partly in Money:

Another important factor responsible for the central position of money in modern times is that money constitutes the most important form of wealth. Everyone i.e., individual, company or corporation or the government wishes to have some cash to meet current obligations and as a precautionary measure (for reserves).

The amount of cash held by people will naturally differ from individual to individual and from institution to institution. A rich man will obviously keep more cash than a poor man. But everyone keeps some cash with himself or as deposit in a bank.

Term Paper # 6. Value of Money: 

Value of money means the buying capacity of money. It shows the purchasing power of money over commodities and services. It denotes the capacity of money to buy commodities and services. It refers to the volume of goods and services which a unit of money will buy at a given line and place. When, a unit of money purchases larger amount of commodities and services, its value is said to be higher and vice-versa.

Since the number of commodities and services are available for exchange with money is very large, it is very difficult to express the value of money in terms of one particular commodity. Therefore, the value of money cannot be expressed only relatively. There is an inverse relationship between the price-level and the value of money. The buying capacity of money is always dependent on the price-level.

When the price-level rises, money buys less and, therefore, we say the value of money has fallen. Similarly, when the price level falls, value of money rises. The variation in the value of money is always accompanied by opposite variation in the prices of commodities and services. In brief, value of money varies inversely with the price-level. It is reciprocal of price level.

Vm = 1/P

Where, Vm denotes the value of money, and P stands for price level.