Money plays important economic role in all societies. It renders invaluable economic services without which the development of modern industrialized societies would hardly be possible. It influences and facilitates all economic activities in the field of consumption, production, exchange, distribution and public finance.

The producer gets moony in payment for the goods the produces or for the services he renders. It can be exchanged at any time for any goods or services. The consumer does not spend alter income that he earns on current consumption. Portion of his income would be saved for things he needs later for a ‘rain day’ and unanticipated nurture consumption requirements. Money comes to his help. He can hold part of his income in consumption requirements. Money comes to his help. He can hold part of his income in money which can be very easily exchanged for things he needs. Furthermore, consumer would be able to spend his income on combinations of goods and services which are most preferable to him. With the help of money, he can easily quails the marginal utilities of different commodities to derive the maximum satisfaction with his limited resources.

The use of money is indispensable to the individual producer in modern societies. It helps him in many ways such as, purchasing raw material, borrowing capital, advertising finished products and in combining the vapors factors of production. Without money these productive activates simply cannot be carried on. Money has enabled producers to select combination of factor inputs for the production of commodities in such a way as to yield the maximum profit.

Money facilitates the exchange process (i.e., trade). We have examined in detail the inconveniences the people had to encounter under the barter system of economy. It was a great hindrance in the way of the development of trade and commerce. The introduction of money has removed all threes barriers, and has stimulated national and international commerce. Not only this. It has also facilitated foreign investments and has promoted international monetary co-operation which in turn has led to the economic integration of the nations of the world.

Government spending and taxes have significant impact on the working of modern economy. Taxes are realized in money and the proceeds of these impositions or revenues are spent on those items and services which ensure the maximum social advantage. Furthermore, when government spending exceeds tax and other revenue, government has a budgetary deficit which it must fiancé. The deficit may be financed by increasing taxes, by borrowing from the public or by borrowing from the central bank. The government borrows by issuing securities. If the cost of one seems lower than the other the government will be inclined to take advantage of the least-cost alternative. This is not possible without the intervention of money. Thus, it is money which helps to know how government operates, particularly the way in which public spending is financed.

Money is the commodity in the form of which rent, wages, interest and profit are determined. Without money, the equitable distribution of national income among the deferent factors of production would indeed be rendered very difficult. Money, in fact, Servest eh purpose of a means of adjustment among the shares that go to the different factors of production.

Money, thus, occupies a central position in a modern capitalist economy. There is simply no adequate substitute for money, nor can we do without it.

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