The English word ‘Money’ has been derived from the word ‘Moneta’ of Latin language. Moneta is another name of Roman Goddess Juno. In ancient times, coins were minted in the temple of goddess Juno, therefore currency was named as money. Money was defined by different economists differently. Hence, money has no single universally accepted definition. 

Following are the different definitions of money :

1. According to Hartley Withers, “Money is that commodity through which we sell and purchase goods”.
2. According to Knapp, “Anything which is declared by the state as money, becomes money”.
3. According to Marshall, “Money includes all those commodities which are generally accepted without investigation and doubt for purchase and sale of goods and services at a specific place and at a specific time.”
4. According to Seligman, “Money is one thing that possesses general acceptability”.
5. According to Kinley, “Money is such commodity which is generally used and accepted as a medium of exchange and measure of value.”
6. According to FA. Walker, “Money is the thing that is used as a currency”.
7. According to Kent, “Money is the thing, that is used as a medium of exchange or accepted as a measure of amount”.

It is clear from the above definitions, that economists are not of a common view’ on defining money* but this too is evident that the thing called money should possess the quality of functioning as money, universal acceptance and statutory mandate. 

Thus, a correct definition could be the following –

“Money is such a thing which has legal and general acceptance in form of medium of exchange, measure of value, storage of value and payment mode of loans.”

Importance of Money – Money has a vital place in present-day economic realm. Prof. Marshall, clarifying its importance, has said, “Money is that pivot around which economic science revolves.” In present age, operation of economy cannot be imagined without money. Because of this importance, the present age is called the age of money. 

We may understand the importance of money from the following points :

(i) Basis of market system – Money has made the market system convenient and dynamic. Money is the most simple method of exchange in an economy. Therefore, all transactions in a market system are done with the help of money.

(ii) Measure of economic development – Money is an index of measurement of economic development of a country. Governments have been able to formulate and implement programmes of economic development because of money only. The comparison of economic growth of various countries has also become possible because of money.

(iii) Basis of Investment – The circulation of money has made savings possible. Today, people save some money from their present income in order to fulfil their future needs, and earn interest by depositing their saved amount in banks and other financial institutions. Such large amounts thus collected in financial institutions, is invested by them in industries. Private investors also directly invest money in industrial units. In this way, savings become a basis for investment.

(iv) Division of labour and specialisation – In present age, large-scale production is done, which reduces the cost of production of goods. This has become possible only due to division of labour and specialisation. Division of labour and specialisation is not possible without money.

(v) Freedom of decision in economic field – Producers and consumers both are free in the market to take rational decisions due to the use of money. Where consumers spend their money in such a way as to ensure maximum utility, the producers spend wisely on various means of production, so as to maximise their production at least cost.

(vi) Basis of social prestige – In the society, along with economic freedom, money also provides the facility of storage of value which becomes the basis of social prestige. The person with more money has more prestige in the economy.