Question

State two primary functions of money.

Answer 1

Two primary functions of money are as follows:
i. Money of Exchange: Money acts as a medium of exchange. Hence, it removes the problem of double coincidence of wants faced under the Barter System. Money has general acceptability and purchasing power so nobody refuses to accept money in exchange for goods and services. As a medium of exchange, money helps us to purchase all goods and services from the market.
ii. Measure of Value: Money acts as a common measure of value. The value of everything can be expressed in terms of money and is known as its price, when we say that the price of one metre of cloth is Rs 15, this means that in order to obtain one metre of cloth, we have give up 15 units of money.