Question

In: Economics

What is the function of money? Discuss how money contributes to economic growth and\or development? If...

What is the function of money?
Discuss how money contributes to economic growth and\or development?
If there is no money will society find a way to exchange goods and services without it?
Explain.

Solutions

Expert Solution

1.

Money primarily serves three important functions:

  • Medium of exchange: Money serves the most important function of acting as a medium of exchange, in order to facilitate transactions or exchange of goods and services among the people
  • Store of value: Money must be able to store value in order to facilitate exchange and serve the purpose of money. That is, it must be stable in its store of value over time
  • Unit of account: Money must function as a unit of account in order to be able to measure all goods and services on a common scale, to make exchange possible

Thus, the above three discussed are the three most important functions of money.

2.

Money contributes to economic growth and development by allowing exchange of goods and services, not within the country but also across countries. This helps countries engage in international trade and grow and develop through additional production and consumption.

3.

Yes, in case of absence of money, society will find a way to exchange goods and services. This can involve either assuming a good or a commodity as money or by engaging in barter exchange.


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