The Characteristics of Good Money

These are the characteristics of “good” money.

1.) Portability – It should be easily transported from one place to another, even in bulk.

2.) Acceptability – It should be accepted throughout the general region.

3.) Durability – It should be able to withstand thousands of exchanges through its lifetime before it is recycled to produce new money. If durability is a problem, more money will be used to produce more money.

4.) Divisibility – It should be able to offer exact amounts of change after a transaction. This is the reason why we have smaller banknotes and coins to buy goods that are not exactly worth certain amounts.

5.) Scarcity – It should be scarce as too much of it may cause it too become fiat money. Fiat money refers to when money looses its money due to too much of it. This explains how precious and valuable items are not so commonly seen.

All 5 must be considered when determining if that money serves as good money.


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