Founded On Truth Business A Money Explanation

A Money Explanation

Throughout this lesson, has been learning about the three primary functions of Money. It is an instrument of exchange, a store of value, and a unit of account. Money can take many forms, but the most important thing about it is that it is accepted by people as a medium of exchange.

Suppose your grandmother sent you $20 tucked inside a birthday card. You could use it to buy things up to that amount in value—but what about if you accidentally left it in your coat pocket for a year? You’d be happy to find it again, because it retains its value. That’s because the $20 serves as a store of value.

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Houses, office buildings, land, works of art, and other commodities also serve as stores of value. But what sets money apart from these other items is that it can be easily exchanged for a large and diverse set of goods and services. This makes it easier for people to trade their labor for a variety of things they need and want.

Money also acts as a unit of account, allowing people to compare the prices of different goods and services. This function allows people to make larger purchases that they couldn’t make with just a handful of cowry shells or barley or peppercorns. It also allows people to make loans to one another without having to worry about who they’re lending to or whether the debt will be repaid.

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