Question

How is characteristic of money is different from their function? Mention any four points.

Answer 1

characteristics of money:
Durability i.e. it needs to last

Portable i.e. easy to carry around, convenient, easy to use

Divisible i.e. it can be broken down into smaller denominations

Hard to counterfeit - i.e. it can’t easily be faked or copied

Must be generally accepted by a population

Valuable – generally holds value over time

functions of money:
medium of exchange

store of value

unit of account

standard of deffered payment

Answer 2

Money is something that people use every day. We earn it and spend it but don't often think There are the three functions of money:

First: Money is a store of value. If I work today and earn 25 dollars, I can hold on to the money before I spend it because it will hold its value until tomorrow, next week, or even next year. In fact, holding money is a more effective way of storing value than holding other items of value such as corn, which might rot. Although it is an efficient store of value, money is not a perfect store of value. Inflation slowly erodes the purchasing power of money over time.

Second: Money is a unit of account. You can think of money as a yardstick-the device we use to measure value in economic transactions. If you are shopping for a new computer, the price could be quoted in terms of t-shirts, bicycles, or corn. So, for instance, your new computer might cost you 100 to 150 bushels of corn at today's prices, but you would find it most helpful if the price were set in terms of money because it is a common measure of value across the economy.

Third: Money is a medium of exchange. This means that money is widely accepted as a method of payment. When I go to the grocery store, I am confident that the cashier will accept my payment of money. In fact, U.S. paper money carries this statement: "This note is legal tender for all debts, public and private." This means that the U.S. government protects my right to pay with U.S. dollars.

Economists say that the invention of money belongs in the same category as the great inventions of ancient times, such as the wheel and the inclined plane, but how did money develop? Early forms of money were often commodity money-money that had value because it was made of a substance that had value. Examples of commodity money are gold and silver coins. Gold coins were valuable because they could be used in exchange for other goods or services, but also because the gold itself was valued and had other uses. Commodity money gave way to the next stage-representative money. 

Let's run down our list of characteristics to see how they stack up.

Durability. A cow is fairly durable, but a long trip to market runs the risk of sickness or death for the cow and can severely reduce its value. Twenty-dollar bills are fairly durable and can be easily replaced if they become worn. Even better, a long trip to market does not threaten the health or value of the bill.

Portability. While the cow is difficult to transport to the store, the currency can be easily put in my pocket.

Divisibility. A 20-dollar bill can be exchanged for other denominations, say a 10, a 5, four 1s, and 4 quarters. A cow, on the other hand, is not very divisible.

Uniformity. Cows come in many sizes and shapes and each has a different value; cows are not a very uniform form of money. Twenty-dollar bills are all the same size and shape and value; they are very uniform.

Limited supply. In order to maintain its value, money must have a limited supply. While the supply of cows is fairly limited, if they were used as money, you can bet ranchers would do their best to increase the supply of cows, which would decrease their value. The supply, and therefore the value, of 20-dollar bills—and money in general—are regulated by the Federal Reserve so that the money retains its value over time.

Acceptability. Even though cows have intrinsic value, some people may not accept cattle as money. In contrast, people are more than willing to accept 20-dollar bills. In fact, the U.S. government protects your right to use U.S. currency to pay your bills.

Well, it seems "udderly" clear at this point that—based on the characteristics of money—U.S. 20-dollar bills are a much better form of money than cattle. 

To summarize, money has taken many forms through the ages, but money consistently has three functions: store of value, unit of account, and medium of exchange.