functions of money Essay

There are several main functions of money. They are; unit of account, medium of exchange, and store of value. Each function describes how money is used in the economy. The medium of exchange speaks to how we use money in exchange for goods. It is like a barter to get someone that has what I want to give it to me in exchange for something that they want. Money makes this an easier exchange. Everyone wants money, as it allows them to turn around and purchase what they want.

If not for money we would have to exchange one good for another. For example if I want to buy a purse that someone is selling I can Just give them a set amount of oney and complete my transaction easily. If we did not have money the transaction would be more complicated. Now I would have to have something that person wants as well. If I do not have anything the other person wants, then I would have nothing to exchange for the purse.

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Unit of money describes the way that the price of good are set in terms of a unit of money. It can serve the purpose of showing the value of different items. Since money is the medium of exchange goods are priced out based on the currency that country used, thus a unit of money. So if I am buying a television I can look at the different amounts of them which utilize a unit of money to tell me which one I can afford to buy , as well as show me which of them is more valuable.

Store of value is the last function. This describes storing some money away for future use. Rather than spending all of our money at once we want to save some for a later date, but we want it to retain its value as well. The best example of this that I can think of may be buying a house. If I buy a home I know that while I am making payments on the house with money, it is retaining it’s value. I can sell that home at some point and get my money back.


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