Money and capital are usually two related concepts, but they are completely different. Money is any asset that is accepted as a means of payment, it is a unit of account and a store of value, while capital is any sum of money that has not been consumed by its owner, but is saved and transferred to the financial market.
They are assets or goods accepted as a means of payment by economic agents for exchange. It also has the functions of being a store of value and unit of account. The money can be coins and bills, debit cards and electronic transfers. It must be endorsed or certified by the issuing entity.
Today, governments through laws determine what is legal tender money, but other entities such as central banks and mints regulate and control the monetary policy of an economy and create coins and bills according to demand and need for physical money.
Money is a neutral or liquid financial asset that serves as an intermediary to optimize the exchange of services and goods, avoiding the inaccuracy of barter. It has three functions:
It has three functions:
It is any sum of money that has not been consumed by its owner, but is saved and taken to a financial market to obtain an income. The capital is invested in financial entities and organizations and in productive activities that can generate benefits for other people.
Sometimes it has been centralized under the command of small groups causing the role of banking institutions and companies from different branches causing monopolization.
Differences between money and capital
- Money is a medium or element used for the exchange of goods. Its purpose is to simplify this exchange.
- Capital is everything that is not spent, but is used to obtain a profit during the exchange of goods. That is, it is everything that is saved and invested with the aim of obtaining an income.