Money’s functions can be divided into two categories
1. Money’s primary functions
The two subcategories of primary functions are as follows.
Money as a Medium of Exchange:
Money serves as a medium of exchange since it may be utilized in any transaction involving the purchase or sale of goods or services. As a result, things may be purchased or sold in return for money.
Measure of Value:
Money may be used as a measurement for determining the worth of a product or service. Simply said, the worth of any product or service may be quantified in monetary terms. Even though the currency varies from nation to country, the money follows a standard and is accepted worldwide.
2.Money’s Secondary Functions
The secondary function may be divided into three categories, as shown below.
Store of Value:
Money’s most important purpose is that it may be stored or conserved. Money may be saved for future use, and it is both cost-effective to simply do so.
Standard of Deferred Payments :
It means that money provides a “standard” for future payments.It’s a lot easier to make delayed payments now than it was before.
When it comes to lending and borrowing, money is essential. Money is borrowed and returned over a period of time.
Transfer of Value :
Money is also used to exchange value.It allows the purchasing and selling of commodities not just inside the country, but also across the globe.
Final Answer:
Money is a means of exchange, to put it simply. It helps in the exchange of products and/or services. Money is created and issued by a country’s central bank or government. This is also known as cash, and it is legal tender, which means citizens must accept it.