Functions of money

(a) Primary functions

(b) Secondary functions

• It means that money can be used to make payments for all transactions of goods and services.
• A buyer can buy goods through money and a seller can sell goods for money.
• It is an essential function of money.

ii) MEASURE OF VALUE:

• Money serves as a measure of value.
• Value of all goods and services is expressed in terms of money.

• It means that money acts as a ‘standard’ for making future payments.
• It has made deferred payments much easier than before.
• Example: When we borrow money from somebody, we have to return both the principal as well as interest amount in the future.
• Money is a convenient mode of calculation & payment of interest amount to be paid in the future.
• This function has facilitated borrowing and lending.
• It has also led to the creation of financial institutions.

ii) STORE OF VALUE:

• Store of value implies a store of wealth.
• Money can be easily stored for future use.
• It is the most convenient and economical means of storing earnings and wealth.

iii)TRANSFER OF VALUE:

• Money also serves for transfer of value.
• It facilitates buying and selling of goods not only in the domestic country but also in other parts of the world.