Money is considered as the King of the free market economy. Every work starts and ends with money. Money occupies in important place in all economic activities. All businessmen, traders and individuals depends upon money for meeting their expenses. In the words of Marshall “Money is the pivot round which the whole economic system clusters”. The truth is that money is one of the greatest inventions of mankind. In money economic every branch of economic activity is different from what it was in barter economy. There is no doubt that money facilitates and motivates all economic activity relating to consumption, production, exchange and distribution. Money enables a consumer to maximise his satisfaction. Money measures the intensity of desire and utility of commodity to a consumer. Money fascilitates production by stimulating saving and investment. It gives molnlity to capital and helps in capital formations. It enables the harnessing of various factors or production so that the entrepreneur is able to maximise his profit. Introduction of money facilitates exchange and helps in the development of trade and commerce, both national and international. Money functions as a common denominator for the distribution of social product. It is in terms of money that wages, rent interest and profits are determined. Money helps the price mechanism to operate and serve as an instrument for the allocation of resources among competing uses. Money is extremely valuable social instrument which has largely contributed to the growth of national wealth and social welfare. It has ensured the smooth functioning of the modern economic system. It has accelerated the process of industrialisation. In money economy there is continuous flow of money payments. This circular flow is essential for promoting economic welfare of society.
Whatever the type of economic system exists money is found to be of great service. In a capital economy, money plays an important role because capitalism basically depends on price mechanism which operates through the medium of money. As Professor Robertson observes “the existence of monetary economy helps society to discover what people wand and how much the want…. and to decide what shall be produced and in what quantities and to make the best use of its limited productive power. And it helps each member of society to ensure that the means of enjoyment to which he has access, yield him the greatest amount of actual enjoyment which is with in his reach”. Even in a socialist economy, price tags are essential for its smooth efficient and economical working. It is said while money is a master in a capitalist economy, it is a servant in a socialist economy. Money also plays a significant role in a mixed economy. It plays a circular role in determining employment, output and income in the private sector. In the public sector is helpful in the allocation of resources and for changing the pattern of income distribution. It is powerful instrument for capital formation and economic development in a developing economy.
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