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Social Science: Money and Credit: Role of Money in an Economy - Role of Money in an Economy

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ConceptRole of Money in an Economy

Question

How is money used in everyday life? Explain with examples.

Solution

In modern times, money is used as a medium of exchange because it has been authorized by the government as a currency. In everyday lives we use money :

to buy goods and services like in a market money can be used to buy clothes, vegetables etc.

to deposit in banks so that money can be saved and used for future use. For example- if a labourer deposits his monthly salary in his bank account, then, he can use it in installments in the whole month.

as a store value. For instance- we cannot store perishable goods like milk, grain etc to exchange goods in future. However, we can buy precious metals like gold and save it for future use.

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Solution Concept: Role of Money in an Economy.
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