Functions of Money

Functions of Money

When money replaced the barter system, a lot of practical issues were solved. Money acts a medium of exchange, a unit of measurement, a store of value and a standard of deferred payments. It plays an important role in transactions.

Medium of Exchange

Money should be accepted liberally in exchange of goods and services in a country.

Unit of Account

Money should be the common, standard unit of calculating a country’s total consumer goods, products, services etc. For example, if a book costs ` 50, it means that the price of the book is equale to 50 units of money. Money is used to measure and record financial transactions in a country.

A Store of Value

Money is used as a store of purchasing power. It can be used to finance future payments.