Factors that determine the value of money.

[TOZZIBLINKZ]

When a certain amount of money can buy fewer goods and services in a particular country this will usually mean that the value of the money has fallen and this can also happen when there is a rise in price . The value of money is further defined as the quantity of goods and services which a given amount of money can buy , in other words the value of money refers to the purchasing power of money . From the above statement we can clearly see factors that affect the value of money which are the price level and the volume of goods and services .

The value of goods varies with the price level to be more elaborate if the price level increases this would mean that a given some of money will buy fewer goods and services . The value of money therefore falls with an increase in the price level . on the other hand volume of goods and services also determines the value of money . Because when more goods and services are available while the supply of money remain constant , the value of money will increase , this is due to the fact that more commodities can be purchased with a given sum of money .

 

[Jasz]

The value of money is determined by the market forces of supply and demand, as well as inflation and growth. Supply is based on the amount of money that is available within an economy, while demand is based on what consumers are purchasing. Inflation refers to the increase in prices for goods, and growth is the increase of the economy itself.

One of the main factors affecting the value of money is supply and demand. If there are more people wanting a specific good or service than there are supplies to fulfill those demands, then a shortage occurs. This causes prices to rise, which affects the value of money because prices rise along with it. The reverse happens when there are more supplies than demands: This causes prices to decrease, which also affects money's value because it decreases as well.

Another factor affecting the value of money is inflation. This refers to a gradual increase in prices for goods over time, which means that items people buy will become more expensive over time without them actually receiving anything extra in regards to quality or quantity. As more money enters an economy and circulates through it, inflation occurs because there is more currency in circulation than there are goods and services to purchase with it; this leads merchants to raise their prices so they can continue to make profit due to consumer desire.

 

[funmi]

There are so many economic indicators that determines the value of a currency we may talk about the purchasing power, the intrinsic value and face value of the money and use all of that to determine what the currency is worth.

When we look at the face value we are looking at what is writing on the surface of the currency, the face value may not really represent the purchasing power as the purchasing power is quiet different from the face value. Like in my country where the rate of inflation is so terrible when some take let's say N10,000 to the market you might say the face value of N10,000 is heavy but when the then thousand naira gets into the market it becomes almost nothing because you can not even afford to buy half bag of edible rice. You can imagine that.
The intrinsic value is cost incurred in making the currency. This also determines the worth of the currency.

Then the economic stability of a country also determines how strong yhr currency of such country will.certainly be , issues bothering on inflation rate, taxation rate, unemployment rate and the likes will determine the currency strength of a country.

 

[btaliat]

I won't waste time in explaining the meaning of value of money as justice has been done to that already by almost commentators of this post. I only need to go straight to my points.

Number one factor that determines the value of money is the amount of money in the circulation. When there are more money in the circulation. There is tendency that the money will be reduced in value. For money to really have much value, it must be scarce. The moment the money is much, the price of goods will rise and there will be loss on the money value. For instance, some years back, a million Zimbabwe dollar may not buy a loaf of bread.

Another reason is the outbreak of pandemic. When there is pandemic in the world, economic activities always stand still. This means people wont make money again but rather be spending money. And when the money I'm circulation reduces, whether the price of goods reduces or increases, people wont afford them.

Lack of investment by the government. There are some countries that only prefer borrowing to finance their economy. They don't save or invest ok capital projects . What they do is the recurring projects that will always demand money ebery year. A country that's borrowing will always have to be servicing its debt with money, hereby reduce the value of its money against the country that it is indebted to.

 

[Setho]

The money is actually something that difference between various locations and it is usually very difficult for you to be able to track the exact value of money that you have because of so many things that I usually happening around you that is beyond your control .
1 . Inflation . Inflation is just the purchasing ability of the general citizens . There are sometimes whereby the money in circulation is actually becoming too much or it is growing at an unprecedented rate and that might lead to the money becoming valueless and you have to pay more for an item .

2. Location . Sometimes you might cut your hair for $10 in your own country but then when you go to another region or another continent it is going to cost you about $20 in order to do that and location actually plays a role in the value of money .
3. Demand and supply . The principal of demand and supply usually plays a very big room whenever it comes to the value that money is supposed to have . For example whenever there is a unexpected increase in the demand for petrol there is usually going to be an increase in the price as well .

 

[CALVINDOL]

If there is anything that we are taught about money it is the fact that money has value and there are some factors that we need to know that totally determines the value of money . The price of goods and commodities sold in the local market actually determines the value of a given sum of money . If you live in Nigeria you will understand that the price of goods and services or in a hole the price of production of goods and services is actually on an increasing rate and these have made the value of money to decrease drastically . When I was little around the age of eight to nine I could remember that an individual in Nigeria can use the son of 5000 naira to cook and interesting and delicious pot of soup , but now even the sum of 15000 and I cannot even cook the most usual and normal kind of soup this probably means that the value of money have totally decreased because of the increase price of goods and services in the local market .

Another factor that totally determine the value of money is also , a quantity of goods and services that are to be sold if the quantity of goods and services that are to be sold is high then the value of money will actually change drastically .

 

[sincerem]

Tje value of a fiat currency is dependent of the country's economic value, when the economy of the country is less valued in the forex market, definitely the the fiat currency of the country will drop in value which means the prices of other countries products will be very much higher whose currency is more valuable. Because, they'll be selling based on their fiat value price, when you go with the less valued currency, you'll pay more. That's the reason why some users from certain country find it difficult to purchase goods, merchandise from a particular country due to the huge difference in their fiat currency value. Only the financial buoyant individuals can afford such amount for the product when it becomes much more expensive due to the high level of the manufacturer's fiat currency value. Here in my country, the inflation has made things to increase drastically high, foreign products have tripped in price, it is very much less affordable for the poor people, if you aren't rich you aren't going to live comfortably due to the high cost of living in my country that is marred by inflation. I believe, it is due to mismanagement of funds and embezzlement.