What is the role of money and how does money facilitate exchange?



Money is a system of value that facilitates the exchange of goods in an economy. Using money allows buyers and sellers to pay less in transaction costs, compared to barter trading. The first types of money were commodities. Their physical properties made them desirable as a medium of exchange.

What is the role of money in exchange?

Money serves as a medium of exchange, as a store of value, and as a unit of account. Medium of exchange. Money’s most important function is as a medium of exchange to facilitate transactions.

Why is money useful and how does it facilitate exchange?

Money helps to facilitate trade because people in the economy generally recognize it as valuable. Since most people recognize money as valuable, they are willing to trade money for goods and services with the intention of one day using the money they received as a seller to buy goods or services from someone else.

What is the role of money and its four functions?





Money serves four basic functions: it is a unit of account, it’s a store of value, it is a medium of exchange and finally, it is a standard of deferred payment.

What is money and its importance?

money, a commodity accepted by general consent as a medium of economic exchange. It is the medium in which prices and values are expressed; as currency, it circulates anonymously from person to person and country to country, thus facilitating trade, and it is the principal measure of wealth.

What is the importance of money?

Why Do We Need Money? Money can’t buy happiness, but it can buy security and safety for you and your loved ones. Human beings need money to pay for all the things that make your life possible, such as shelter, food, healthcare bills, and a good education.

How is money used as medium of exchange explain with example?

Goods and services can be bought and sold with the use of money. For example, someone who wants shoes can buy it with money and if someone wants to sell shoes, that also can be done by receiving money. … Money is used as a medium of exchange because it’s the intermediary in the exchange process.

How does money acts as a medium of exchange?





Money facilitates transactions of goods and services as a medium of exchange. Producers sell their goods to wholesalers in exchange of money. Wholesalers, in turn, sell their goods to the retailers and the retailers sell these goods to the consumers in exchange for money.

Why is money called a medium of exchange short answer?

Money is called medium of exchange because money is a widely accepted token that can be used for exchange of any good or service. In old days, barter system was used as medium of exchange and later it was gold.

What are the 5 functions of money?

The following points highlight the top six functions of money.

  • Function # 1. A Medium of Exchange: …
  • Function # 2. A Measure of Value: …
  • Function # 3. A Store of Value (Purchasing Power): …
  • Function # 4. The Basis of Credit: …
  • Function # 5. A Unit of Account: …
  • Function # 6. A Standard of Postponed Payment:


Why money is the most important thing in life?

It helps us get some of life’s intangibles — freedom or independence, the opportunity to make the most of our skills and talents, the ability to choose our own course in life, financial security. With money, much good can be done and much unnecessary suffering avoided or eliminated.



How does money acts as a medium of exchange?

Money facilitates transactions of goods and services as a medium of exchange. Producers sell their goods to wholesalers in exchange of money. Wholesalers, in turn, sell their goods to the retailers and the retailers sell these goods to the consumers in exchange for money.

What is the role of money in the production of goods Class 10?

Answer: Money acts as a medium of exchange as it acts as an intermediate in the exchange process and transactions. A person holding money can easily exchange it for any commodity or services that he or she might want.

What are the 7 functions of money?

Answer 6. Functions of Money:

  • Medium of Exchange: The most important function of money is to serve as a medium of exchange or as a means of payment. …
  • Measure of Value: …
  • Standard of Deferred Payments: …
  • Store of Value: …
  • Transfer of Value: …
  • Distribution of National Income: …
  • Maximisation of Satisfaction: …
  • Basis of Credit System:

What are the 5 functions of money?

The following points highlight the top six functions of money.

  • Function # 1. A Medium of Exchange: …
  • Function # 2. A Measure of Value: …
  • Function # 3. A Store of Value (Purchasing Power): …
  • Function # 4. The Basis of Credit: …
  • Function # 5. A Unit of Account: …
  • Function # 6. A Standard of Postponed Payment: