ECO- Money and banking, page no 133-134

Money is a multifaceted concept that serves as the lifeblood of modern economies, facilitating exchange, standardizing value, and storing wealth. At its core, money represents a medium of exchange, enabling individuals and businesses to trade goods and services efficiently. Beyond its functional role, money also embodies social and psychological significance, influencing status, power dynamics, and relationships. As a unit of account, money provides a standardized framework for pricing, costing, and financial transactions, while its store of value function ensures that purchasing power is preserved over time. The value of money is derived from societal trust, government backing, and economic activity, making it a dynamic and constantly evolving entity. For examples, [banknotes and coins].

The functions of money:

• Money acts as a medium of exchange: Money functions as a way to conduct trade. It is widely recognised and accepted as a means of payment for goods and services.

• Money is a measure of value[or unit of account]: It measures the market value of different goods and services. It is far more efficient for trading purposes to express the price of goods and services in dollars[or other currency] rather than using products such as cloth , shells, salt or livestock-all of which were ancient forms of money.

• Money is a store of value: It can be stored and used at some time in the future. In other words, money must be able to hold its purchasing power over time. Money therefore gives firms and households flexibility in the timing of their sales and their purchases, thus removing the urgency to trade straightway.

• Money is a standard of deferred payment: This means that money is used as the standard for future[deferred]payments of debt. For example, loans taken out today are repaid in the foreseeable future. Thus, money is used as the standard to pay off debts.

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