Money – Money is the simple medium of exchange, a store of value, a unit of account and a standard of deferred payment. It plays an important role in modern economies of the countries. Money is anything which is widely used in payments of several goods and acts as a measure and store of value.
There are several functions of money for the economic development
- Medium of exchange – Money has greatly accepted in market and all exchanges take place in terms of money. By using money, goods can be purchased and sold in the market. When an individual sells the goods, he gets money and can use money for purchasing several goods. Thus money acts as a exchange of goods and easy service. Finally it used as a mediator in the exchange of goods because the seller gets money and the customer gives money to the seller.
- Measure of value – Money is used as a measure or a standard value. It means that it is used as the unit in terms in which the value of goods and services is measured with the help of money. In other words, money acts as a common denominator, a standard measurement and a unit of account. It also determines the rate of exchange between several types of goods and services due to the values are expressed in terms of money.
- Store of value – If an individual has money or get the money he can hold or store for purchasing goods in future. It means that money also works as a store of value. An individual may use money in times of need and emergency.
- Standard of Deferred Payments – Money works as standard of deferred payments due to debts are expressed in terms of money. Deferred payment means that payment is postponed for future date that is it means debt. By using money, borrowing and lending are possible. If the goods are sold on credit then the debt is expressed in terms of money. Now money works as a standard of deferred payment due to it is very simple for credit transactions by using money. Due to this money has promoted insurance companies, growth of banks and other financial institutions.