Question

Explain the significance of the 'Unit of Account' function of money.

Answer 1

Money serves as a common medium or unit of account. As various goods and services are measurable in different units such as meter, litre and gram, it becomes difficult to measure them using a common unit. Money has provided a common yardstick to measure all these different units in a common denomination known as price. This has made different goods and services comparable to each other in terms of their respective prices.