1-Primary Functions:The most important primary functions of the money are Medium of exchange and Standard of common measure.
Medium of Exchange:
When money passes from hand to hand in the exchange of goods and services, goods are sold for money and goods are purchased for money. In this way money has solved the problem of double coincidence of wants. This was the difficulty of the barter system.
Standard of common measure:
The value of each commodity is expressed in terms of money. Just meter measures length, kilogram measures weight so money is measuring rod of values, it is common denominator by which can measure and compare all goods and services. In other words it is a yardstick of values of commodities.
2-Secondary Functions:
Standard of deferred Payment:
Deferred payments are those which they will have to make in future. Future payments and debt are measured in terms of money. This was great difficulty in barter system. Now-a-days most of the transactions are made on credit basis, which means that payment will be made on some future date. All are made in terms of money whose value remains fairly stable.
Storability:
It is also important function that money provides facility of storing. It is because in past vegetable, wheat and animals loose their value with the laps of time. Money can be stored for a long time.
Transferability:
In past wealth can not be transferred from one place to another. Now money provides facility of transferability. It can transfer easily from one place to another or from one person to another.
Medium of Exchange:
When money passes from hand to hand in the exchange of goods and services, goods are sold for money and goods are purchased for money. In this way money has solved the problem of double coincidence of wants. This was the difficulty of the barter system.
Standard of common measure:
The value of each commodity is expressed in terms of money. Just meter measures length, kilogram measures weight so money is measuring rod of values, it is common denominator by which can measure and compare all goods and services. In other words it is a yardstick of values of commodities.
2-Secondary Functions:
Standard of deferred Payment:
Deferred payments are those which they will have to make in future. Future payments and debt are measured in terms of money. This was great difficulty in barter system. Now-a-days most of the transactions are made on credit basis, which means that payment will be made on some future date. All are made in terms of money whose value remains fairly stable.
Storability:
It is also important function that money provides facility of storing. It is because in past vegetable, wheat and animals loose their value with the laps of time. Money can be stored for a long time.
Transferability:
In past wealth can not be transferred from one place to another. Now money provides facility of transferability. It can transfer easily from one place to another or from one person to another.
