Mention and explain the functions of money – NABTEB QUESTION

Functions of money:

i. Medium of exchange: transactions are facilitated through the use of money exchange

ii. Unit of accounts: Money serves as a means of keeping financial records arising from economic transactions. Such records include income and expenditure, profits and losses, balance of payment accounts e.t.c.

iii. Measure of value: through the prices attached to goods and services, the relative values of goods and services are estimated.

iv. Standard for deferred payment: The use of money had made possible lending, borrowing and credit transactions.

v. Store of value: When prices are relatively stable, money serves as a good store of value and saving is encouraged.