Function of Money

It might sound bloated, but without money, the world’s existence seems to stop moving. It will, of course, arrive at a big halt. Money has a very dominant effect on everyone. Money is assumed as the blood of businesses, and the world economy is immense. The function of money, therefore, goes without changing. Money is also referred to as three services or functions: the story of value, the medium of exchange, and a unit of account. Money is a very necessary need that everyone wants to acquire. Therefore, in this article, we will discuss the types of money, the functions of the money market, and the contingent functions of money. 

What is Money?

Money is a monetary or economic unit that functions as the most acknowledged medium of trade for transactional goals or purposes in an economy. Money and shoes provide the reducing service transaction cost,  the double coincidence of wants.  Money has developed in the same form as trade goods having a material property to be adopted by market associates as a medium of exchange. Money can be issued as a legal tender or fiat, market-determined,  fiduciary media and substitutes, and electronic cryptocurrencies. 

What is the Need for Money?

Let’s take an example for a better understanding.

Rohan has obtained a total of 50 litres of milk from these cattle.  Now he can either employ the whole amount or store it for his future use. But here, the product, milk, is a perishable item, and hence he would not be able to store it in a jar for a very long time, which he can use afterward. 

 In such scenarios, Rohan can exchange the surplus milk ok in return or exchange services or goods of equal value. Nevertheless, finding the right buyer who has an item or product that piques Rohan’s interest is windy. In this circumstance, having money to exchange milk is the best and the only solution to the problem. He can use the money he exchanged anytime to purchase an equal amount of item or product or an equal amount of service or goods he needs to acquire.

Functions of Money

 Functions of money and mostly classified into two factors, namely,

•  Primary functions
•  Secondary functions

Primary Functions

 Medium of Exchange:

•  It is an essential function of money
•  A buyer can purchase goods through money and cancel them afterward for money.
•  The medium of exchange depicts that it can be used for all payments and transactions of goods and services.

The measure of Value:

Money serves well as a measure of value

The value of services and goods is displayed in terms of money. 

Secondary Functions 

• Standard of delayed or deferred payments
• Store of value
• Transfer of value 

Types of Money

• Commodity money
• Fiduciary money
• Fiat money
• Paper money
• Reserve money 

Conclusion

The money market functions can be classified into two types, namely primary and secondary. The primary function upholds the measure of value and the medium of exchange. On the other hand, the secondary function consists of the Transfer of value,  store of value, and standard of delayed or deferred payments. Money is a monetary or economic unit that functions as the mostly acknowledged medium of trade for transactional goals or purposes in an economy. Money and shoes that reduce service transaction costs are the double coincidence of wants.  The money service eliminates provisions from the double accident of wants in exchange.