Question

List and explain the three properties of money?

Answer 1

Money serves as a medium of exchange : The money facilitates transaction by serving as a medium of exchange. The seller expressed the goods in terms of money which he can use for buying the goods in the market for himself. Thereby facilitating exchange without hinderance and need for coincidence of wants. Money as a medium of exchange removes the difficulty of barter system in which transaction could not take place due to absence of double coincidence of wants.

Money serves as a store of value: Money can be stored with ease and limited space. In the barter system of exchange there was a space needed for store of commodities and also the value of goods stored diminished with time. However in case of money the value does not erode and also it is easy to store.

Money serves as a means of deferred payment: Money can be used as a means of deferred or delayed payments. The buyer can promise to pay the money at a future date unlike the barter system where exchange at a future date may lead to chaos with erosion of quality or quantity with time.