Q. 5 C

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Answer :

Money is a medium of exchange and various goods and services are exchanged using money as a medium. It has 6 major functions


1) A medium of exchange – Money is a universally accepted medium of exchange and various goods and services are exchanged using money, like using the money you can buy grocery for your home consumptions, shopkeepers can buy other services like paying for travel using the same money.


2) A measure of value – Value of any goods and services are defined in money and using that measure various goods and services can be compared, for example a shoe can be worth 500 Rs and other pair can be worth 600 Rs, using this monetary value we can compare the worth of both.


3) Store of value: money can be stored in physical or electronic form for a long time and unlike other goods, like grains, with time money does not deteriorate and its value is more stable. For example you can buy home form money to a sale later but the value of the home may be more or less over a period of time-based on many factors, but in the form of money is more stable and can be easily converted to other goods and services easily whenever required. Money is the most liquid assets


4) Basic of credits: Money can be borrowed from other people to pay later on with or without interest and borrowed money can be used for various purpose. For example a newly married couple needs a TV at home, it is easy to borrow money to buy TV and repay the money later instead of borrowing TV directly from someone.


5) A unit of account: Money is used by individual and companies to maintain an account with stakeholders. It is also used or measure the performance of a company or even country, in the form GDP.


6) A Standard for postponed payment : It is a standard when you buy something and payment is made for a longer duration, like borrowing for a home , where repayment time is longer and payment is made in money


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