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What are the functions of money 5 marks question |
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Answer» hii everyone ◆In modern times money is used as a medium of exchange because it has been authorised by the government as a currency.◆It acts as a store value. We can buy precious metals like gold and save it for future use.◆Some modern forms of money are: paper currency, coins , demand deposits and cheques. They are accepted as a medium of exchange goods or services or buy things.◆A person holding money can easily exchange it for any commodity or service that he or she wants. Every person prefers to receive payments in money and exchanges for things he or she wants. \tMoney\'s most important function is as a medium of exchange to facilitate transactions.\tIn order to be a medium of exchange, money must hold its value over time; that is, it must be a store of value.\tMoney also functions as a unit of account, providing a common measure of the value of goods and services being exchanged.\tWithout money, all transactions would have to be conducted by barter, which involves direct exchange of one good or service for another.\t\xa0In other words, in a barter system, exchange can take place only if there is a double coincidence of wants.\tMoney effectively eliminates the double coincidence of wants problem by serving as a medium of exchange that is accepted in all transactions. |
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