Question

State the four functions of money. Explain any one of them.

Answer 1

Four functions of money are as follows :

(i) Money serves as a medium of exchange.

(ii) Money serves as a store of value.

(iii) Money is a standard of deferred payments.

(iv) Money serves as a unit of account.

Money as a store of value: People save a part of their earnings for use in future. Money fulfils this. People can store surplus purchasing power for future use. This means that one can hold one's earnings until the time one wants to spend it. This is facilitated by the fact that money comes in convenient denominations and is easily portable.