Functions of money.

Hello Everyone, When asked what money is, it can be defined as anything that is generally accepted as a medium of exchange. The question then arises: What are the functions that a society expects from money? They are identified as the main functions of the currency.

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If an item can serve the purpose of money, society will accept it as cash. Coins, notes and checks are treated as cash because they are recognized as capable of performing these functions.

Operating as an exchange medium means that money is generally accepted as a means of settling transactions. The ability to convert money into commodities - goods and money - comes from an exchange medium. They were able to make goods and make money and buy various items for consumption. There are a number of features that money must incorporate in order to use money effectively as a medium of exchange.

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Another function of the currency is that money can be used as a means of storing the value up to a certain date. People use various means to save some of their income for the future. This implies that savings deposits, government securities, as well as savings are possible first. Money can be stored for a long time and can be used to purchase goods and services when needed. For money to be used as a means of value, the purchasing power of money is essential for long periods of time. There has to be price stability. The inflation rate should be zero.

The function of money as an accounting unit is to measure all goods and goods produced in a country in a common measure. The value of any goods is expressed in cash. This gives each commodity a measure that is comparable to the value of another. Then the exchange becomes easier. Is efficient. It also facilitates accounting for the scarce resources that individuals have.

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Another is that money can be used as a means of settling the value of a transaction. Cash is a medium of savings as well as a means of paying off debts. A lot of credit transactions occur in an economy. Such transactions occur only if there is a common means to pay the present value. Lending and lending has become very popular as money is an intermediate medium. Thanks for reading.