Wednesday, May 18, 2011

Primary functions of money

Primary functions of money

* Medium of exchange:
The most important functions of money is to serve as a medium of exchange. It facilitates buying and selling to take place. It solves all the problems of barter system. People can exchange goods and services through money. By using money anything anything can be purchased in the market. For example, a seller sells a commodity by accepting money and by using this money, he can buy some other commodity which he wants.

* Measure of value:
Money is a common measure of value. The value of all the commodities can be expressed in terms of money. It is a measuring rod and it can be expressed in the price ratio of different commodities. In India, rupee is the standard of measure, and therefore prices of goods and services are expressed in terms of rupees.

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