Functions of Money Checkpoint Money Resource: Money:

Functions of Money

CheckPoint Money Resource: Money: Its Functions Characteristics Submit a 250- 300-word response addressing points: • Money acts a unit account, medium exchange, a store . Describe functions. • Provide money functions.

Money

Money is defined according to it three major function. It is in many cases referred to as a store of value, unit of account and a medium of exchange. Money is any item that is legally satisfying the needs for undertaking a transaction in an economy Woodford M., 2000()

Money as a Unit of Account

A unit of account means assigning a value to goods and services in the economy Woodford M., 2000.

This function of money assigns money the key role of designating value to tradable items in an economy. Money as a unit of account indicates what buyers and seller are willing to part with or receive.

When one visits a suit merchant, they will see that woolen suits would cost more compared to linen or those made from cotton. The function of money in this perspective is to assign the unit cost of the suits made from different materials and the value traders are ready to accept for the items.

Money Medium of Exchange

The core and primary function of money are to facilitate the exchange in transactions. It is expected that people willing trade, be it buying or selling need to have a medium that is acceptable and recognized Woodford M., 2000.

The reason why money came in place for batter trade is because it made exchange easy. As a medium of exchange, it eliminates the need for double coincidence of want since it is already an accepted medium of exchange.

As a medium of exchange, one is assured that they can get that which they seek so long as they meet the price set for commodity. If shoppers go to a grocery store, with the desire to buy some food items, is easier when they or she knows the money they carry is accepted. In the case of Batter trade, it is cumbersome since the traders and buyers will have to want what each other hold as value for what they wish to exchange.

Money as Store of value

Money is a store of value since those who hold it can postpone using it and still have the pleasure of using it a later time. This implies that withholding money is storing value. Money is the best store of value since it value is stable at least compared to other commodities. Stability of a medium of exchange is one that is considered amply when qualifying an item as money Woodford M., 2000()