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Explain two secondary functions of money. |
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Answer» Two secondary functions of money are as follows: (i) Store of value: Money functions as a store of value which means that money holds it’s valued over a period of time. Money resolves the problem of double coincidence of wants because money can be stored over time and it does not lose its value. Though money is not the only store of value as the same purpose can be served by land, gold, etc., it is the most liquid medium of exchange. (ii) Standard of deferred payments: The payments to be made in a future period are referred to as deferred payments. Money has eased the deferred payments. When money is borrowed from someone, it has to be returned with the interest payment. Keeping an account of these payments in terms of goods is very difficult. For instance, if a farmer borrows some wheat from a person, then it is very difficult to return this loan with interest in terms of wheat of the same quality. |
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