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In: Economics

What does it mean when we say that money functions as a medium of exchange, as...

What does it mean when we say that money functions as a medium of exchange, as a store of value, and as a unit of account?

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Expert Solution

Ans. Money has three primary functions:- medium of exchange, store of value and it acts as a unit of account.

When money is used to intermediate the exchange of goods and services, it is performing a function as a medium of exchange.

To act as a store of value, money must be reliably stored, saved and retrieved.  

Money as a unit of account means that it is a standard numerical unit of measurement of market value of goods, services and other transactions. It is a standard of relative worth and deferred payment.


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