c) the functions of money

d) the functions of money (as a medium of exchange, a measure of value, a store of value, a method of deferred payment)

the functions of money

• a medium of exchange

  • bartering can be inefficient, as it requires a double co-incidence of wants

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

• a measure of value

  • money ascribes value to goods and services

  • knowing the value of goods and services allows consumers and firms to make fair exchanges

• a store of value

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

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

• a method of deferred payment

  • money is an acceptable way to arrange the terms of credit or to settle any debts

  • it is also easier to pay workers between regular intervals with money