This led to the invention of money so as to enable and facilitate exchange without any wastage of time. The use of money helped in removing the difficulties in the barter system.
In other words it is a yardstick of values of commodities. Money has made possible the huge foreign investment in today's world. Money as a medium of exchange: Money ceases to be the good store of value and men lose faith in money.
Possession of money enables one to get hold of almost Secondary functions of money commodity in any place and money never locks a buyer. Modern economists are laying stress on liquidity of money.
Thus it acts as a store of value. Money makes the distribution of this joint production among the various factors of production easy.
Now-a-days most of the transactions are made on credit basis, which means that payment will be made on some future date. Here the wants of Rama and 1 lari do not coincide.
Due to its being generally acceptable and valuable, money embodies value in its most general form. A borrower who borrows a certain sum in the present undertakes to pay the same in future. With the introduction of money, all such difficulties were removed.
Banks create credit with the help of money. They may be stated as follows: So money is a medium of exchange.
With the help of money, it is possible to determine and distribute national income among various classes of society. As we know price is the money value of a good.
Money enables consumers to get maximum satisfaction through the law of Equi-marginal utilities. The supply of credit in an economy is dependent on the supply of nominal money. How much of rice is to be offered to fetch a goat in exchange? As we know all capital is wealth.
Similarly, money acting as a medium of exchange could facilitate the exchange of services also. Money as a unit of account: Secondary functions include standard of deferred payments, store of value and transfer of value.
The demand and supply are two major forces of market which work only because of money.
Any increase or decrease in money supply leads to a commensurate increase or decrease in the availability of credit money in the economy. Future payments and debt are measured in terms of money. Holding money is equivalent to keeping a reserve of liquid assets because it can be easily converted into other things.
Money is the link which connects the values of today with those of the future. Income and consumption of different factors of production is determined in terms of money. It is not possible to create credit if there is no reserve money.
This medium of exchange function of money has attained more importance with the extension of trade based on credit. Paper money does not require much space to be stored; 2.
It acts as a standard of Value. This was the difficulty of the barter system. So money enables both current buying and selling with immediate cash payments and current and present transactions to be discharged in future. Money is used to measure the value of everything Except love, life, care, respect etc.
As we know money is a good slave but a bad master. Creditors gain when there is a rise in the value of money or fall in the price level and creditors loose when there is a fall in the value of money or rise in the price level.Functions of Money: Primary, Secondary and Contingent agronumericus.com is a matter of functions four, A Medium, a Measure, a Standard and a Store.
Money has many important functions to perform. These functions may be classified as follows. Money and its functions and characteristics Money as a measure of value Money as means of exchange Money as a means of accumulation and a store of value Money as a standard of payment 3.
This means that the term money should be used to include anything which performs the functions of money, viz., medium of exchange, measure of value, unit of account, etc.
Secondary Functions: Monetary Management: Money is very important factor of monetary and fiscal policies. Collection of taxes and public finance management is only possible in terms of money. Collection of taxes and public finance management is only possible in terms of money. Secondary Functions of Money.
3. Standard of Deferred Payment: Money is a unit in terms of which debts and future transactions can be settled. Thus loans are made and future contracts are settled in terms of money. Money serves as the standard of deferred payment or units in which future or deferred payments are agronumericus.com function applies to interests, rents, salaries, pensions, insurance.
Secondary functions of money: 1:Aid to specialization production and trade:The use of money has helped in removing the difficulties of barter. 2:Influence in income and consumption:The use of money has a direct bearing on the levels of income and consumption in the country.Download