Question

Money is to the economy as oil is to an engine. Please discuss in 150 words

Answer 1

In simple words, money is an instrument which has four functions such as acting as a medium of exchange, a store of economic value, unit of exchange and a medium of deferred payment. Therefore, money helps in the settlement of economic transactions, storing economic values created by economic agents, expressing the values of goods and servicing through standard measurements and paying off loans, etc. Without money, people would have to depend on the barter system to buy and sale of goods. However, the barter system requires the double coincidence of needs to make exchange possible. Money removes this problem. Money makes the transaction much easier and faster. Money helps us express the value of the produced goods and services in a common language understandable to all. Money helps in storing economic values for the future and paying off debts in the future. Therefore, without money, the economic system will fail to survive.