Definition of money
Money is the currencies that are used to buy services and goods, and money may be associated with the presence of a lot of wealth, and money is defined as all papers and coins used to buy things, and it is possible to save money by keeping it in bank accounts. From other definitions of money, it is the means used to get people to obtain various things, and money may be used in the stock markets, or to establish various projects.
Definition of economics
Economics is the cognitive science that is concerned with wealth, consumption, and production, and economics is defined as the studies that deal with the distribution of consumption for services and goods, and the welfare of people. Another definition of economics is the science that deals with issues of taxation, business, finance, and the production processes of selling, buying, and distributing products.
The importance of money and the economy
Both money and the economy are important in human life; Whether through individual transactions or on the scale of major businesses related to companies, the following are a set of points that summarize the importance of money and the economy:
The importance of money
The importance of money emerged as one of the most important inventions that man has reached. This led to money becoming one of the basic things in the lives of all individuals in societies, and this importance becomes clear based on the following points:
- Money is one of the most important means that support the purchasing power of consumers, and it is the main component of income on which it depends in its monetary form, and the economic sector relied mainly on money; Because of its role in controlling the nature of individuals' desires, and the amounts they want to obtain from goods and services.
- The money supports the production process; Because it contributes to enabling the owners of establishments to take appropriate decisions, especially the priority of producing products or determining certain quantities of them.
- Money is one of the things inherent in the specialization of work in the sense of the division of labor; Where many workers can produce and work, and each of them gets his share of the products or the financial wages; for consumption or savings.
The importance of the economy
Economics is one of the most important sciences that have affected human life. It contributed to the emergence of many phenomena affecting the peoples of the world, and the importance of the economy is summarized according to the following points:
- Economics has been associated with political science; Many political programs are created based on means of an economic nature.
- The economy has contributed to enhancing the security, welfare, and stability of countries that have a rich economic sector.
- The economy has helped the development and prosperity of various fields of work.
Branches of economics
Economics is divided into two main branches:
- Microeconomics: It is a branch of economics, and it is concerned with the study of influences, phenomena, and partial economic events, such as studying the economic behavior of individuals, such as producer behavior, consumer behavior, or studying the economic situation of a city within a state, and companies are distributed according to microeconomics to the following categories:
- The company achieves economic profit if the average total cost is less than the cost of any of the additional products that are produced, and this indicates that the company is located at the maximum profit point of production.
- A company achieves a natural profit if the economic profit is zero, and this profit appears when equality occurs between the average total cost and the maximum profit point of production.
- The company reduces its losses if the price is between the variable average cost and the average total cost, and this requires companies to keep their work going; As the percentage of losses may increase in the event of cessation of work.
- The company must be closed down if the price is less than the average variable cost at the point of production of the maximum profit; Which contributes to reducing losses when work stops, with increased production, the loss increases, and the financial return decreases.
- Macroeconomics: It is the second branch of economics, and is concerned with the study of influences, phenomena, and macroeconomic events, such as the gross domestic product of a country, or aggregate supply and aggregate demand. Macroeconomics relied on modifying public economic policies; To get rid of the negative effects of economic crises; Which contributes to achieving the stability and growth of the economy, and also the macroeconomic administration has taken care of two types of economic policies: monetary policy and tax policy.
Areas of financing using money
The use of money within the business sector depends on a group of main areas that help enterprises finance their business, the most important of which are:
- Corporate finance: It is one of the important areas in which money is used. It depends on the nature of the procedures applied by the establishments while making financing decisions, and the owners of the establishments must know how to deal with money; Especially when paid for the purchase of stock for work, and corporate financing contributes to activating many areas, such as financial analysis, capital management, and supporting the development of financial statements, and others.
- Investment: It is the second financial field used in the business environment, especially large ones. Establishments rely on investing in various securities, whether short-term or long-term, such as bonds and shares, and may also rely on investment in physical assets such as land.
- Financial institutions and markets: It is the third area of the use of money in financing, and it includes all markets that deal with various types of money, such as primary and secondary financial markets, bond and stock markets, and capital markets. Financial institutions contribute to supporting these markets; Through their work on the application of financial mediation during the implementation of money transfers between savers (trade agents) and companies.