Explain the advantages of 'store of value' function of money.
OR
Explain the significance of 'medium of exchange' function of money.
Explain the advantages of 'store of value' function of money.
OR
Explain the significance of 'medium of exchange' function of money.
Store of Value: Money also acts as a store of value. People can keep their wealth in terms of money. Money helps us to store the purchasing power which can be used at any time in the future to purchase anything. People wish to keep a part of their wealth in the form of money because savings in terms of goods is very difficult and its quality and value deteriorated with the passage of time. However, it suffers from the drawback that money's value may change over time.
It has the following advantages:
(i) Money comes in convenient denominations.
(ii) It is easily portable.
(iii) It is easily exchanged for goods and services at all times.
OR
Medium of Exchange: Medium of exchange is the primary function of money. People exchange goods and services through the medium of money. Money has the quality of general acceptability. Therefore all the exchange in the economy takes place in terms of money. Sellers accept money in exchange for their goods. By having a medium of exchange, people do not have to waste their time and effort to find a person who may provide them goods of their choice in exchange for other goods. This function provides the following benefits:
(i) It overcomes the diffculty of barter system of lack of double coincidence of wants.
(ii) It allows freedom of choice as people can purchase goods of their own choice.
(iii) It widens the areas of trade.
Store of Value: Money also acts as a store of value. People can keep their wealth in terms of money. Money helps us to store the purchasing power which can be used at any time in the future to purchase anything. People wish to keep a part of their wealth in the form of money because savings in terms of goods is very difficult and its quality and value deteriorated with the passage of time. However, it suffers from the drawback that money's value may change over time.
It has the following advantages:
(i) Money comes in convenient denominations.
(ii) It is easily portable.
(iii) It is easily exchanged for goods and services at all times.
OR
Medium of Exchange: Medium of exchange is the primary function of money. People exchange goods and services through the medium of money. Money has the quality of general acceptability. Therefore all the exchange in the economy takes place in terms of money. Sellers accept money in exchange for their goods. By having a medium of exchange, people do not have to waste their time and effort to find a person who may provide them goods of their choice in exchange for other goods. This function provides the following benefits:
(i) It overcomes the diffculty of barter system of lack of double coincidence of wants.
(ii) It allows freedom of choice as people can purchase goods of their own choice.
(iii) It widens the areas of trade.
