ICS FA ICom Notes Class XI Principles of Economics Importance of Labour Unions and Value of Money

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Importance of Labour Unions

Trade unions are of great significance for an economy because of the reason that they create congenial relation between the workers and the management and help a lot in developing mutual understanding among them. This brings industrial peace, which becomes an effective stimulation for the growth and expansion of industries in a country.

Trade unions help the employers by extending cooperation in settlement of labour disputes. In the absence of trade unions it becomes difficult if it is not possible for the employers to contract the individual workers and find out their views on certain issues related to the disputes. Trade unions also assist the employers in labour administration and control. The efficiency of workers is also improved through trade unions and as such, the employers are benefited.

Value of Money

The value of money refers to the purchasing power of one unit of money in terms of goods and services. It indicates the quantity of goods and services that can be had in exchange of one unit of money. If the value of money is studied in relation to the home market, it is called internal value as against external value, which gives the value of money in terms of foreign currency.

Value of Money and Price Level

The price level of a country refers to the value of goods and services in terms of money. It means that value of money is expressed in terms of money. As for example, one unit of money supposes fetches 3 seers of wheat and value of 3 seers of wheat is one unit of money. Suppose the value of money rises and its one unit now fetches 5 seers of wheat. It means that the value of wheat has come down and now 5 seers of wheat will fetch one unit of money, which previously only did 3 seers.

From the above example it is evident that value of money is followed by the fall in price level and vice versa. In other words rise in price level makes the value of money fall and the same quantity of money can be had with more units of money. The above fact can also be interpreted as an increase in the quantity of money brings a corresponding fall in the value of money and the fluctuations in the value of money occurs due to a change in the quantity of money. This relationship between value of money and its quantity is explained by quantity theory of money.