Question

What are the three functions of money? May you offer an example of an asset that is considered money other than US currency?

Answer 1

The three main functions of money are :-

• Store of value - Money is said to have this function as we can store, retrieve and also exchange money with goods and services anytime in future.
• Medium of exchange - It acts as a Medium of exchange as it allows people to purchase various goods and services in exchange for money.
• Unit of account - It acts as a unit of comparison of various goods and services. It is hence called a monetary unit of comparison as we can compare the prices or values of different goods and services with money.

An asset that is considered as money other than US currency is Savings accounts which is a near money as it can be easily converted into cash and has all the functions of money.