HSC Arts 12th Board ExamMaharashtra State Board
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Explain the Secondary Functions of Money. - HSC Arts 12th Board Exam - Economics

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Question

Explain the secondary functions of money.

Solution

Secondary Functions of Money:-

1. Standard of deferred payments:-

In the modern economy many transactions take place without instant payments. The debtors make a promise to make payments on some future date. Such future payments are possible because of money. Under Barter System taking loan was easy, but its repayment was difficult because loans were in the form of grains or cattle. Money facilitates lending and borrowings, because the borrowings are in the form of money and the repayment are also in the form of money. Due to general acceptability, stability of value compared to other goods, durability etc., money acts as a standard of deferred payments.

2. Store Value:-

Money works as a store of value. Along with satisfaction of present wants, provision for satisfaction of future wants is equally important. It requires savings from the current earnings. Money is a convenient means through which savings can be done easily: According to Lord J.M. Keynes, "money is a link between the present and the future." Money serves as a store of value because money has purchasing power. It can be used to purchase real assets like land, house etc. and financial assets like shares, debentures, bonds, etc.

3. Transfer Value:-

Today with the extension of trade among various countries and organizations it becomes necessary to transfer purchasing power from one place to another. This is easily done by money. Money helps to shift the purchasing power from one place to another e.g. real assets like building or agricultural land from one place can be sold and with the help of that money, building or land can be purchased at some other place.

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Solution Explain the Secondary Functions of Money. Concept: Function of Money - Secondary Functions.
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