![]() Even after a long period of time money still remains valuable. To be an effective medium of exchange, money must retain its value over time. It also allows for calculations, estimations, relative costs and profitability in macroeconomics. Assets, liabilities, incomes, expenditures, etc are all valued in monetary terms. It also facilitates accounting and the concepts of profit or loss. ![]() This value of goods and services is expressed in terms of its price. Like the standard of measuring the height of objects is feet or inches, the standard of measuring the value of goods and services is money. How do we measure the value of things? We use the standard of money. ![]() Browse more Topics under Money And Money Market In fact, it also facilitates more choices and healthy competition. It gives us the economic independence to buy any goods and/or services from a wide market. Money allows us to separate the transaction into sale and purchase, rather than exchange.Īnd since money is a universally accepted medium of exchange, we now have freedom of choice. Now we do not have to rely on a double coincidence of wants (barter system). So as a medium of exchange is the primary advantage of money. Money, however, removes all these disadvantages. 1] Money as a Medium of Exchangeīefore the invention of money, we relied on the barter system that had many disadvantages. Let us take a look at the three main functions of money. Our entire economy and society depend on money to function smoothly. These functions help us transit in goods and services with ease. Money performs many primary and secondary functions. One great example of this is cryptocurrency. Now virtually anything can be considered money as long as it performs the functions of money. In this introduction of money, we will see that the last few decades have seen great evolvement in the concept of money. ![]() One of the traditional definitions of Money calls it “a unit of account, a means of payment and a store of value”. It fulfills many functions and comes in many forms so defining its entire scope is tricky. What is money? It is very difficult to have only one definition of money. Let us start with the most important question. ![]()
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