Question

1. The basic function of money is​

Answer 1

Answer:

Money serves several functions: a medium of exchange, a unit of account, a store of value, and a standard of deferred payment.

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Answer 2

Answer:

1. Money solves the problems created by the barter system. (We will get to its definition soon.) First, money serves as a medium of exchange, which means that money acts as an intermediary between the buyer and the seller.
2. Second, money must serve as a store of value. In a barter system, we saw the example of the shoemaker trading shoes for accounting services. But she risks having her shoes go out of style, especially if she keeps them in a warehouse for future use—their value will decrease with each season. Shoes are not a good store of value. Holding money is a much easier way of storing value.
3. Third, money serves as a unit of account, which means that it is the ruler by which other values are measured. For example, an accountant may charge $100 to file your tax return. That $100 can purchase two pair of shoes at $50 a pair. Money acts as a common denominator, an accounting method that simplifies thinking about trade-offs.

Finally, another function of money is that money must serve as a standard of deferred payment. This means that if money is usable today to make purchases, it must also be acceptable to make purchases today that will be paid in the future.