describe the three purposes that money must perform

Expert Solution

The purpose of money are as follows-

1-Store of Value-Money is a way to transfer money from one point of time to another(present to future).

Ex-Money that X earn today can be consumed by him at any point of time in future.

Storing value in terms of goods(in barter system) were a cumbersome process as goods tend to perish.

2-Unit of Account-Due to presense of money the value of different goods and services as well as debts can be expressed in terms of money.

Under Barter system one good was expressed in terms of another goods due to which valuing 2 different goods was difficult.

3-Medium of Exchnge-It implis that money can be used to produce different goods and services.It is due to the fact that it is provided the status of legal tender by the government.

Under Barter systerm In order for a trade to happen there was a requirement of double coincidence of wants.However such a things do not exist now due to presence of money.

Rahul Sunny answered 1 year ago

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