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Question

What functions are performed by money?

A
Served as a medium of exchange
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B
Common measure of value
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C
Store of value
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D
All the above
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Solution

The correct option is B All the above

Money refers to a common medium of exchange that is issued under the law of government and acts as a legal tender for the whole country. The functions performed by money are as follows:

1. Medium of exchange: As a medium of exchange, it refers to a function of money in which money is considered as a mode of exchanging goods. This function of money solved the main problem of barter system which was double coincidence of wants.

2. Common measure of value: As a measure of value, it refers to a function of money that helps in determining the value of goods and services. Money is taken as the common denominator while measuring the value of goods and services in monetary terms.

3. Store of value: As a store of value, it refers to the function of money that helps individuals in storing their wealth in the form of money. Therefore, money acts as an asset that sustains value over a period of time.



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