Question

Define money. Describe its main functions.

Hint:

Four core functions to remember: exchange, account, deferred payments, and store of value.

Answer 1

Meaning: Money is anything that is generally accepted as a medium of exchange and performs standard monetary functions. Modern money includes currency, demand deposits, and near-money instruments. 
Functions: 

(i) Medium of exchange—eliminates double coincidence of wants, enabling specialization and trade. 

(ii) Measure of value/unit of account—expresses prices and accounts in a common metric. 

(iii) Standard of deferred payments—contracts, loans, and credit are denominated in money. 

(iv) Store of value—transfers purchasing power across time (subject to inflation risk). 

(v) Transfer of value—facilitates remittances and payments across space. 
Good money requires acceptability, divisibility, portability, durability, uniformity, and limited supply under credible authority (central bank). In modern economies, central banks manage money supply and payment systems to promote price stability and growth.