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Question

Explain the significance of the "Store of Value" function of money.


Solution

It was virtually impossible to store surplus value in the barter economy; the discovery of money has eliminated this difficulty. With the help of money, people can store surplus purchasing power and use it whenever they wish to. Money serves as a store of value for goods in liquid form. Savings in the form of money are not only secure but the possibility of it being disrupted is very low. Besides, money can be carried around and is portable. By facilitating accumulation of money, money has become the only basis of promoting capital formation.

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