functions of money

• The functions of exchange

  1. medium of exchange
  2. store of value
  3. measure of value
  4. method of deferred payment
• Measure of value

  1. enables a value to be placed on products with ease and enables comparisons to be made
• method of deferred payment

  1. enables borrowing and lending meaning someone can borrow or buy something instead of saving up goods overtime
• Store of value

  1. money tends to hold its value in the short and long term whereas if trading perishable goods, the value diminishes quickly

  EVAL: inflation means that money does not hold its value long term in terms of purchasing power
• Medium of exchange

  1. money eliminates the necessity of there being a coincidence in wants.
  2. facilitates specialisation given it is easier to trade, you can focus on specialising in the production of a narrow range of goods and services