Functions of money Flashcards
1
Q
Why is money a medium of exchange?
A
Money is used to buy and sell goods and services. A worker accepts payment in money because they know that they will be able to use that money to buy products in a shop.
2
Q
Why is money a measure of value?
A
Money acts as a unit of account. At times of high inflation, money ceases to act as a unit of account. High inflation destroys the ability of money to perform this function.
3
Q
Why is money a store of value?
A
A worker who receives wages is unlikely to spend that money immediately. They might defer spending because it’s more convenient to spend the money later.
