c) The functions of money

• state the four functions of money

• a medium of exchange

• a unit of account

• a store of value

• a standard of deferred payment

• describe the function of money as a medium of exchange

• bartering = inefficient → requires a double co-incidence of wants

• money eliminates the need to barter and a double co-incidence of wants

• describe the function of money as a unit of account

• money ascribes value to goods and services

• the value of goods and services can be compared + consumers and firms can make fair exchanges

• explain the function of money as a store of value

• money holds the same value over time (except in cases of inflation)

• → money can be saved and exchanged over long periods of time

• explain the function of money as a standard of deferred payment

• money can be used to → make future payments + pay workers between regular intervals