Explain the ‘store of value’ function of money. How has solved the related problem created by barter?
Explain the significance of 'store of value' function of money
Explain the 'store of value' function of money. Flow has it solved the related problem created by barter?
Explain the store of value function of money
Solution
Store of Value
People keep their wealth in the form of money because money is the most liquid form of wealth. Savings in the form of money is maintained for purchasing commodities in the future. In this case, the values of commodities are being stored. Hence, money acts as a store of value.
However, the store of value is completely absent under the barter system. Wealth is stored in terms of goods as there was no money in existence. There were many problems such as storage of goods cost, loss of value and movement of transfer. Hence, it is not practically possible to store people’s purchasing power.
Money facilitates exchange beyond limits. Here, the store of value function does not create value loss over a period of time.
