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(i) Store of value.Money being the most liquid is a convenient form in which to store wealth i.e. can be held as an asset
This function is also called asset function of money it is essential that goods chosen as money be not easily stored without deterioration in value.
Gold could be kept safely without deteriorating but in modern time paper money can be kept in account to serve as an asset.
Money has an advantage that an individual can buy with it anything at any time which is not the case for other assets that have to be sold and converted into money and only then can they be used to buy other goods.
(ii) Standard of deferred payments.These are those pmts to be done in future (deferred payment)
A loan is measured and paid in terms of money. A large no of credit transactions involving future payments are made on daily basis.
The existence of standard of deferred payment enables borrowers to borrow money in exchange for a claim against them to pay in future.
(iii) Medium of exchange.In the barter economy a great difficulty was experienced in exchange of goods and services as the exchange in barter system required a double coincidence of wants.
Money has removed these difficulties where an individual A can sell his good to B for money and then he can use the money to buy goods from others who have these goods.
As long as it is generally acceptable there will be no difficulty in process of exchange. By serving as a very convenient medium of exchange, money has made possible the idea of specialization in the modern economic system.
(iv) Measure of value.Money serves a common measure of value or unit of account unlike the barter system in which various goods can be measured and compared with each other.
Money serves as a Yard stick of measuring the value of goods & services.
As the value of all goods and services is measured in units of money the relative value can be easily compared.
maurice.mutuku answered the question on July 29, 2017 at 13:08
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