Question

Explain the primary functions of money.

Answer 1

The medium of exchange and measure of value are the two primary functions of money.

1) Money acts as a medium of exchange. The major function of money is to facilitate the process of exchange by removing the defects of the barter system. Money acts as an intermediate in the exchange process and is thus known as a medium of exchange. Anyone can exchange goods for money and buy commodities which are required for personal use.

2) Money is the measure of value. It is the monetary expression of the market value of goods and services.