What is finance?

When we talk about finances, we are referring to entities or apartments directly related to the circulation of money between companies, individuals and States. Finance is a branch of economics that focuses on the management of monetary resources and, also, in obtaining them.

Therefore, finances are directly related to saving and investing. But also, with the consumption or expenditure of the companies or economías familiares, and with public spending. Although, in the latter case, by opposition. Since what is not spent is saved and normally invested. In the case of a State, its finances are directly related to its fiscal policy.

The value of money is not uniform over time, but its price changes, like that of any merchandise. This is important, because it allows you to make profits - and also losses - by trading money.

What is the price of money?

Well simply the rate or interest rate. It is the value that is paid for the loan of money, and that is the difference between the price of money today and what it will have in the future. Any operation with money has to take into account the risk and the benefit. Both concepts are in a direct relationship. That is, the more risk an operation has, the possibility of obtaining more benefits (but also more losses) will exist.

Another of the variables that most influence the value of money is the inflation. In this case, it is linked to the strategies of the States, which choose to put more money into circulation. In this way, the existence of a greater quantity of money in the same market, determines that the value of money decreases, and, therefore, that the nominal price of products and services becomes more expensive.

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