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Question
Write answer in 'one' or 'two' paragraph .
Explain the primary functions of money.
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Solution
There are two main primary functions of money:
i. Medium of exchange - Money acts as a medium of exchange as it facilitates exchange through a common medium i.e. facilitates exchange through currency. With money as a medium, the two components of a transaction, namely sale and purchase, can be easily separated.
ii. Unit of value - Money serves as a common medium or unit of value. The goods and services are of different types and are measurable in different units such as meter, litre, gram etc. Money has provided a common yardstick to measure all these different units in a common denomination known as price. This has made different goods and services comparable to each other in terms of their respective prices.
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