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Characteristics of Money - KNEC Notes and Revision Materials

The document outlines the essential characteristics of money, which include acceptability, durability, divisibility, cognizability, homogeneity, portability, stability in value, liquidity, scarcity, and malleability. Each characteristic is described in terms of its importance for money to function effectively as a medium of exchange. The notes serve as a revision material for understanding the fundamental properties that define money.

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42 views1 page

Characteristics of Money - KNEC Notes and Revision Materials

The document outlines the essential characteristics of money, which include acceptability, durability, divisibility, cognizability, homogeneity, portability, stability in value, liquidity, scarcity, and malleability. Each characteristic is described in terms of its importance for money to function effectively as a medium of exchange. The notes serve as a revision material for understanding the fundamental properties that define money.

Uploaded by

Ashington Waweru
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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11/10/2023, 10:36 Characteristics of Money - KNEC notes and Revision materials

Characteristics of Money
November 25, 2020 KNEC notes and Past Papers

For a commodity to perfom as money it has to have the following characteristics.

Acceptability – money must be acceptable to everyone for it to be used as a medium of exchange


Durability – should be able to last for a long time without getting torn,defaced or losing its shape and texture.the material used to
make money should therefore be of a quality that resists wear and tear.
Divisibility – should be easily divisible into smaller denominations but still maintain its value.this enables the buyer to purchase
various quantities of goods and services.
Cognizability – should be made of a special material that is easily recognizable to minimize risk of forgery and printing of fake notes
and mint coins. this cognizability of money enables people to differentiate various denominations of the currency.
Homogeneity – should be made using a similar material so that it appears identical e.g. 500 notes should be printed using the
same material and have identical security features to eliminate risk of confusion and forgeries.all notes of the same denomination
should be identical.
Portability – should be convenient to carry even if it has a high face value.it should neither be too bulky to carry around as this
would hamper trade.ie should be light.
Stability in value – should last for a long time without changing in value so that it maintains credibility and acceptability.money that
fluctuates in value makes people want to hold their wealth in form of goods.
Liquidity – should be easy to convert into other forms of wealth.one should be able to quickly convert money into properties or other
forms of assets.
Scarcity – should be relatively scarce in supply.if money was abundant in supply then it would lose value.
Malleability – the material used to make currency coins should be easy to cast into required shapes.

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