What are characteristics of currency? | Homework.Study.com (2024)

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What are characteristics of currency? | Homework.Study.com? ›

Answer and Explanation:

In order for money to function well as a medium of ex- change, store of value, or unit of account, it must possess six characteristics: divisible, portable, acceptable, scarce, durable, and stable in value.

A currency board maintains full, unlimited convertibility between its notes and coins and the anchor currency at a fixed rate of exchange. A currency board's reserves are equal to 100 percent or slightly more of its notes and coins in circulation, as set by law.

In general, there are four main characteristics that money should fulfill: durability, divisibility, transportability, and inability to counterfeit.

There have been many forms of money in history, but some forms have worked better than others because they have characteristics that make them more useful. The characteristics of money are durability, portability, divisibility, uniformity, limited supply, and acceptability.

What are the six characteristics of money? durability, portability, divisibility, uniformity, limited supply, and acceptability.

Answer and Explanation: Durability represents how well a form of currency will hold up under continued use. The coins produced by the US Mint for example have a great amount of durability with many of them still in use long after they were produced.

- You can sell something, such as labor, and store the purchasing power that results from the sale in the form of money for later use. Money must be able to withstand the wear and tear of being passed from person to person. Paper money lasts one year on average; coins last for many years. Easy to carry.

Is not a characteristics of money? ›

Expert-Verified Answer

The correct answer is B) Lack of divisibility.

The Four Basic Functions of Money

Money serves four basic functions: it is a unit of account, it's a store of value, it is a medium of exchange and finally, it is a standard of deferred payment.

6.13 Liquidity is an important characteristic of the financial instruments that should be included in broad money. The liquidity of a financial instrument subsumes other more specific characteristics such as negotiability, transferability, marketability, or convertibility, as well as divisibility.

One can classify currencies into three monetary systems: fiat money, commodity money, and representative money, depending on what guarantees a currency's value (the economy at large vs. the government's precious metal reserves).

Although banks do many things, their primary role is to take in funds—called deposits—from those with money, pool them, and lend them to those who need funds.

For a commodity or currency to be recognized as money, it must be fungible, stable, recognizable, portable, and durable. Different countries around the world use their own monetary systems, which are regulated by a central monetary authority.

Stability. Of all the qualities of good money, stability is probably the most essential one. The value of money cannot change for a long period of time and hence remain stable. If the value of money keeps changing, then it will fail to function as a measure of value and as a standard of deferred payment.