The three functions of money are to serve as: (1) a medium of exchange, (2) a unit of account, and (3) a store of wealth. In a small paragraph explain each of these functions.
Money serves as a | ||||||||||
MEDIUM OF EXCHANGE - A medium of exchange means that you can facilitate | ||||||||||
transactions through money. You can buy and sell goods with the use of money. | ||||||||||
UNIT OF ACCOUNT - A unit of account means that with money you can compare the | ||||||||||
value of goods and services. In other words, you can compare the price of a television | ||||||||||
set to the price of a refrigerator and analyse which one is more expensive. | ||||||||||
STORE OF WEALTH - Money serves as a store of wealth. In other words, instead of owning | ||||||||||
different kind of physical assets to be wealthy, a person can own money, since money is a store of wealth. | ||||||||||
Money can be invested in savings accounts, stocks, bonds, mutual funds and real estate. However, if money is | ||||||||||
not invested in any asset then the value of money depreciates because of a rise in inflation. |
Get Answers For Free
Most questions answered within 1 hours.