Discuss two contingent functions of money.

1.	Discuss two contingent functions of money.
Answer» Facilitates Credit: Money facilitates the functioning of credit instruments such as cheques, promissory notes, bills of exchange, etc. Such credit instruments facilitate the transfer of value from one person to another. Liquidity: Money is the most liquid form of all the assets and wealth. Gold, silver, land, cheques are not as liquid as money. If the need arises, then these assets need to be converted into money, but on the other hand, money need not be converted into any other form as it is readily acceptable. Apart from being liquid, money also provides a guarantee of liquidity/solvency to other forms of wealth and assets. This implies that money can be converted into any type of asset and on another hand, any type of asset can be converted into money.

Answer»

Facilitates Credit: Money facilitates the functioning of credit instruments such as cheques, promissory notes, bills of exchange, etc. Such credit instruments facilitate the transfer of value from one person to another.

Liquidity: Money is the most liquid form of all the assets and wealth. Gold, silver, land, cheques are not as liquid as money. If the need arises, then these assets need to be converted into money, but on the other hand, money need not be converted into any other form as it is readily acceptable. Apart from being liquid, money also provides a guarantee of liquidity/solvency to other forms of wealth and assets. This implies that money can be converted into any type of asset and on another hand, any type of asset can be converted into money.

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