Question

When saving are given as a loan and borrower repays the amount, money serves the function of ________.

• A. unit of measurement
• B. store value
• C. standard of deferred payment
• D. medium of exchange

Answer 1

Answer: (C)

standard of deferred payment

Deferred payments refer to payments made on loans, salaries, pensions, insurance premium, interests, and rents. The necessary condition for deferred payment is that the amount of repaid money should be the same as it was at the time of purchase of the good or at the time of taking loan. Since all the goods and services can be expressed in terms of money, it makes the future payments easy and functional. Moreover, the value of currency does not change with time which makes it easy for the borrower to take money and repay it in future. Therefore, money serve as a standard of deferred payment.