Question

Explain any two functions of money.

Answer 1

Two functions of money are:

(i) Medium of exchange: Money as a medium of exchange means money can be a mode of payment for the exchange of goods and services. This solves the problems of double coincidence of wants which is inherent in the barter system of trade. This facilitates trade and commerce.

(ii) Unit of account: This is also the function of measure of value. Money as a unit of account means it works as a standard unit for quoting prices. It makes money a medium of comparing prices of goods and services.