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LECTURE:6

Functions of money

Function of money
Money is anything that is generally accepted as payment for goods and services and repayment
of debts. The main functions of money are distinguished as: a medium of exchange, a unit of
account, a store of value, and occasionally, a standard of deferred payment.
Medium of exchange
When money is used to intermediate the exchange of goods and services, it is performing a
function as a medium of exchange. It thereby avoids the inefficiencies of a barter system, such as
the 'double coincidence of wants' problem.
Unit of account
A unit of account is a standard numerical unit of measurement of the market value of
goods, services, and other transactions. Also known as a "measure" or "standard" of
relative worth and deferred payment, a unit of account is a necessary prerequisite for the
formulation of commercial agreements that involve debt
Store of value
To act as a store of value, a commodity, a form of money, or financial
capital must be able to be reliably saved, stored, and retrieved — and be
predictably useful when it is so retrieved. Fiat currency like paper or electronic
money no longer backed by gold in most countries is not considered by some
economists to be a store of value.
Standard of deferred payment
While standard of deferred payment is distinguished by some texts,particularly
older ones, other texts subsume this under other functions.A "standard of
deferred payment" is an accepted way to settle a debt– a unit in which debts are
denominated, and the status of money as legal tender, in those jurisdictions
which have this concept, states that it may function for the discharge of debts.
When debts are denominated in money, the real value of debts may change due
to inflation and deflation, and for sovereign and international debts
via debasement and devaluation.
Attachments:
LECTURE:6
LECTURE:6
Functions of money
Functions of money
Function of money
Money is anything that is generally accepted as payment for
Function goods and services and repayment
of money
of debts. The main functions of money are distinguished as: a medium of exchange, a unit of
Money
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store of value, generally accepteda standard
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of deferred and services and repayment
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of wants' problem.
function as a medium of exchange. It thereby avoids the inefficiencies of a barter system, such as
Unit of account
the 'double coincidence of wants' problem.
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When debts are and
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devaluation.in money, the real value of debts may change due
to inflation and deflation, and for sovereign and international debts
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via debasement and devaluation.
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Reference:WWW.google.co.in

Prepared by MBA\MRS R.CHITRA[ASSISTANT PROFESSOR\TSBA004]


27/11/09
LECTURE:6

Functions of money

Function of money
Money is anything that is generally accepted as payment for goods and services and repayment
of debts. The main functions of money are distinguished as: a medium of exchange, a unit of
account, a store of value, and occasionally, a standard of deferred payment.
Medium of exchange
When money is used to intermediate the exchange of goods and services, it is performing a
function as a medium of exchange. It thereby avoids the inefficiencies of a barter system, such as
the 'double coincidence of wants' problem.
Unit of account
A unit of account is a standard numerical unit of measurement of the market value of
goods, services, and other transactions. Also known as a "measure" or "standard" of
relative worth and deferred payment, a unit of account is a necessary prerequisite for the
formulation of commercial agreements that involve debt
Store of value
To act as a store of value, a commodity, a form of money, or financial
capital must be able to be reliably saved, stored, and retrieved — and be
predictably useful when it is so retrieved. Fiat currency like paper or electronic
money no longer backed by gold in most countries is not considered by some
economists to be a store of value.
Standard of deferred payment
While standard of deferred payment is distinguished by some texts,particularly
older ones, other texts subsume this under other functions.A "standard of
deferred payment" is an accepted way to settle a debt– a unit in which debts are
denominated, and the status of money as legal tender, in those jurisdictions
which have this concept, states that it may function for the discharge of debts.
When debts are denominated in money, the real value of debts may change due
to inflation and deflation, and for sovereign and international debts
via debasement and devaluation.
Attachments: