Question

State with reasons whether you agree or disagree with the following statement.
Money performs various functions.

Answer 1

Yes, I do agree with this statement.

Money serves as a medium of exchange, as a store of value, and as a unit of account.

1. Money's most important function is as a medium of exchange to facilitate transactions. Without money, all transactions would have to be conducted by barter, which involves direct exchange of one good or service for another. It is a medium of exchange that is accepted in all transactions, by all parties, regardless of whether they desire each others' goods and services.

2. In order to be a medium of exchange, money must hold its value over time; that is, it must be a store of value. Money is an easily transported store of value that is available in a number of convenient denominations.

3. Money also functions as a unit of account, providing a common measure of the value of goods and services being exchanged. Knowing the value or price of a good, in terms of money, enables both the supplier and the purchaser of the good to make decisions about how much of the good to supply and how much of the good to purchase.