A sum of money is a specific amount or total value, often used in financial transactions. It can be anything from a single coin to a vast fortune, and it is an important concept in business, economics, budgeting, and accounting.
One of the most important things about money is that it’s a medium of exchange. When your grandmother sends you $20 tucked into your birthday card, you can use it to buy whatever you want. The same thing goes for stock, which you can buy and sell on a stock market.
Another essential function of money is that it’s a unit of account, which allows for the comparison and evaluation of goods and services based on their price in terms of the sum of money they cost. This allows people to make informed choices based on their values and preferences.
A third function of money is that it’s able to store and transmit value. For example, a bank will keep some of your deposit as reserve, but the rest can be lent out to someone else who wants it. This process is called the multiplier effect.
A final key function of money is that it has the “time value.” In other words, a sum of money today seems to be worth more than the same amount in the future. This is because most people would prefer to receive the sum of money now, rather than three years from now. The amount that a sum of money will be worth in the future is calculated using a formula that involves a principal amount and some interest rate, usually simple interest. סכו״ם כסף
