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Explain the two function of money. |
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Answer» There are six function of money are: (i) A Medium of Exchange (ii) A Measure of Value (iii) A Store of Value (iv) The Basis of Credit: (v) A Unit of Account: (vi) A Standard of Postponed Payment A Medium of Exchange: The only alternative to using money is to go back to the barter system. However, as a system of exchange the barter system would be highly impracticable today. For example, if the baker who supplied the green-grocer with bread had to take payment in onions and carrots, he may either not like these foodstuff or he may have sufficient stocks of them. A Measure of Value: Under the barter system, it is very difficult to measure the value of goods. For example, a horse may be valued as worth five cows or 100 quintals of wheat, or a Maruti car may be equivalent to 10 two- wheelers. Thus one of the disadvantages of the barter system is that any commodity or service has a series of exchange values. |
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