Question

Which of the following are the functions of money?

Options

• Medium of exchange

• Measure of value

• Store of value

• All of the above

Answer 1

All of the above

Explanation:

Money has solved the flaws of the barter system in the following way:

Medium of exchange

• There were no double coincidences of wants under the barter system. Finding someone who both owned and required our goods was challenging. As a result, communication was severely hampered.

Measure of value

• There was no uniform measure of worth in the barter system. It was impossible to determine the exact worth of the commodities being traded. This problem has also been solved through money.
• Money serves as a common denominator for expressing the worth of all products and services.

Store of value

• It was extremely difficult to save wealth for future use under the barter system.
• Money can be kept indefinitely without losing its value.
• Money can be simply saved for later use.