Functions of money

Commerce study Manual STUDY MANUAL|PDF NOTES|SYLLABUS|REVISION
  • Medium of exchange-money is generally acceptable everybody in exchange for goods and services.it therefore enables trade to be carried out conveniently hence reducing drawbacks of barter trade
  • Measure of value-when commodities are valued in terms of money,a problem of fixing exchange rate is solved.this is because money provides a common denominator in which the values of various goods and services are expressed.
  • A unit of account-money can be held for no other purpose than accounting.money is a unit which goods and services are valued.
  • Store of value-this is because it is easily convertible into other forms of assets.money can also be kept as savings for future transactions since it is durable and relatively stable in value.
  • Standard of deferred payment-a debt incurred today can be paid at a later date using money.ie used to settle future payments.
  • Transfer of immovable properties-using money,we are able to transfer the value of a commodity from one person or place to another.eg a piece of land in Mombasa can be sold and the money received used to acquire a piece of land of an equivalent value in another province.
  • Measure of wealth-wealth can be measured in monetary terms.



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