Question

explain the significance of money. what are the purposes for demand for money?

Answer 1

Significance if money lies in serving its three functions.

Money has various purposes for demand which also explains its significance. These include -

• It serves as a medium of exchange
• It stores value and acts as an account unit.
• It facilitates division of labour and also the productivity.
• It promotes the savings of people.
• It helps in the satisfaction of customers and producers by selling and purchasing of goods.
• Money demand represents the rates and revenues. If income rises, then there will be more demand for money, thus enabling consumers to purchase more goods.
• The demand for holding money depends on the frequency of getting paid, and the cost of bank deposits.