Money is any commodity a metal or even piece of paper which is generally acceptable by people as a medium of exchange, a measure of value, store of value, and transfer of value.
The function of money: The following are the functions of money:
- Money as a medium of exchange. Goods and services are exchanged with money. So money acts as a medium of exchange.
- Measurement of value. The price of the goods and services is fixed in terms of money. So money measures the value of any commodity and service.
- Store of wealth. Money acts as a store of wealth. In the barter system, it was very difficult to store perishable goods. But now money has solved this problem.
- Standard of deferred payment. If we want to repay our loan we can return it in money term. So money acts as a standard of deferred payment.
- Transfer of value. Money can transfer value from one place to another.
- Money also acts as a unit of account, basis of credit, measurement of productivity, measurement of utility, basis of the income distribution, and as a liquid form of wealth.
