Money, we use it all the time.
In this article, I’ll explain the functions of money, I will also explain the conditions that are needed to accept money. The functions of money, there are four basic functions we use money to estimate the value of goods and services.
Secondly, We use money for buying and selling its medium of exchange. A standard of deferred payment is buying or investing on credit. Credit is possible because of savings, so money is a storage of value.
I’ll explain these functions separately. The first function is money as a unit of value, it measures the value of various goods and services which are produced in an economy. In other words, money works as a unit of value, standards, or value. In a barter economy without money, it was very difficult to decide how much volume of goods should be given in exchange for a given quantity of a commodity money by performing the function of common measure of value has saved society from this difficulty.
Now, the value of various goods and services is expressed in terms of money. Such as five dollars per meter or two euros per kilogram, etc. In this way, money works as a common measure of value by expressing the exchange value of all goods and services in money.
By working units of value, money has facilitated business and trade. Money facilitates transactions of goods and services as a medium of exchange.
The second function of money.
Producers sell their goods to wholesalers who sell the same goods to the consumers in exchange for money. Working as a medium of exchange has eliminated the inconvenience that was faced in barter transactions. We have to trust the value of money to accept it as a medium of exchange. Modern economic setup is based on credit and credit is paid in the form of money only. In reality, the significance of credit has increased so much that we can see it as the foundation stone of modern economic progress. We can buy and pay today, but we can also defer payments (with services such as Klarna). This is boring but you can imagine that without money, credit is much more difficult.
The last function is the store of value.
In a bar economy, it was virtually impossible to store surplus value. The discovery of money has removed this difficulty with the help of money, people can store a surplus of its purchasing power and use it whenever they want. Saving money is not only secure, but its possibility of being destroyed is also very low. This formation of capital by savings can be done in two ways.
First, you lend your money to someone, for example, by opening a savings account with a bank. In return, you want to receive interest.
Alternatively, you can invest money as an owner of an enterprise, for example, by buying shares this increases the expectation to receive future profits from investments which can be paid out in the form of dividends.
