Functions and Role of Money

Functions of Money

Medium of exchange: Money is universally accepted in buying and selling goods and services. Its acceptance simplifies the exchange process by eliminating the need for barter, or trading goods and services directly.
Store of value: Money holds its value over time. It can be stored, saved and retrieved in the future. Without money as a store of value, goods and services must be used immediately or lose their value.
Unit of Account: Money provides a standardised measure of value. It allows us to compare the value of different goods and services.
Standard of Deferred Payment: Money is an accepted method for settling debts. It allows for the deferral of payment until a future date.

Facilitates Transactions: The primary role of money is to facilitate transactions of goods and services. It is a universally accepted means of transaction which makes the process of buying and selling more efficient.
Acts as a Measure: Money acts as a common measure of value. It allows us to compare and evaluate the worth of different products and services.
Enables Savings: Money allows accumulation of wealth by enabling savings. People can save money and use it in the future for various purposes.
Serves as a Standard for Deferred Payments: This allows people to borrow or lend money and settle the debt in future. It offers financial flexibility and contributes to economic growth.
Instrument of Fiscal Policy: Governments use money as a tool to implement their fiscal policy. Manipulation of the money supply is one way in which economies are controlled and regulated.