Money Functions and Importance

Money is any article of trade which is normally suitable as both a measure of value and a medium of exchange. For an article of trade to be a good medium of exchange:

It must be normally acceptable. It should be fairly rare. It should be without a doubt divisible into func­tional units. It should be standardized or homogeneous in character. It should be somewhat long-lasting or durable. It should be portable.

Functions of money

A medium of exchange – this is its key function whereby one can barter.

Unit of account – it affords a way by which goods/services can be priced.

Store of value – money can be stored (put aside) for future expenditure. Nevertheless, money does not always uphold its value.

Means of deferred or delayed payment – money makes credit transactions achievable.

Importance of money

Money resolves the double coincidence of wants, problem of barter.

It helps out in the role of the price mechanism.

It allows production to be feasible in our current complicated economy.

– Money allows specialisation, division of labour, and extensive production to be achievable.

– Money facilitates economic development to take place.

– Money makes simpler both the procedure of manufacturing and allocation of goods and services.