Question

1. What is money according the Central Bank of England? (10 points).What are its functions and what role does it play in the economy? (10 points).

Answer 1

Answer - As per the Central Bank of England , money is not only about the currency notes or the coins that are issued by the central bank and are in circulation. It is also the debit card , credit card , bank account , everything that can be used to make a transaction. Each thing that can be used to buy other thing in exchange can be called money and need not certainly be a coin or currency note. Most of the money is in the form of deposits , and very less money is present in the form of physical currency.

Functions of money are as follows -

1 - It acts the medium of exchange and any good or service can be bought in return by paying money

2 - It acts as a measure of value and is used to find out the value of the good or service in terms of common unit.

3 - It has a definit value and is not ambiguous in nature.

4 - Money acts as the store of value and its value does not change even when it is saved for future.

5 - It leads to solving of the problem of double coincidence of wants which prevailed in barter system