Question

Explain the secondary functions of money.

Explain how money performs the function as a standard of deferred payment. 

Explain how money performs the function as a store of value. 

Explain how money can act as a store of value.

Write one secondary function of money. 

Explain the store of value functions of money. 

Mention the secondary functions of money.

What are secondary functions of Money?

Explain any two secondary functions of money.

Answer 1

1. Standard of Deferred Payments: Money serves as a standard of deferred payment. Deferred payments refer to those payments which are to be made in the future. In a modern economy, a large number of transactions involve future payments which can easily be stated in terms of money. Suppose you borrow a sum of ₹ 20 000 at 10 per cent interest per annum for one year. It means that you promise to pay ₹ 22,000 (₹ 20,000 as principal and ₹ 2,000 as interest) after one year. Money serves as a standard for such future payments.
2. Store of Value: Store of value means store of wealth for use in the future, i.e., shifting of purchasing power from the present to the future. Money is not perishable and its storage costs are also considerably lower. It is acceptable to anyone at any point in time. It, thus, enables the people to save a part of other current income and store it for future use. Thus, the money provides the link between the present and the future. Store of value function of money is also called as asset function of money. Money is a matter of functions four. A medium, a measure, a standard, a store.
3. Transfer of Value: Money also serves as a transfer of value. Money can be transferred easily from one place to another and from one person to another person. Therefore, with the help of money, purchasing power can be transferred. An individual who has money has puchasing power and he/she can transfer the purchasing power to anyone just by transferring this money. For example, when a father gives pocket money to his son, he transfers purchasing power to his son to buy different goods and services.