ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Money is a liquid asset used to facilitate transactions of value. It is used as a medium of exchange between individuals and entities. It’s also a store of value and a unit of account that can measure the value of other goods.

Detailed explanation-2: -Money is called medium of exchange because money is a widely accepted token that can be used for exchange of any good or service. In old days, barter system was used as medium of exchange and later it was gold.

Detailed explanation-3: -Unit of account. Money also functions as a unit of account, providing a common measure of the value of goods and services being exchanged.

Detailed explanation-4: -Because money is expressed in units of a currency, money acts as a measure of value that enables people to compare the value of different goods and services. For example, assume admission to a movie is $10, and a latte at Starbucks is $5. The theater would say the cost of admission is $10, not two Starbucks® lattes.

Detailed explanation-5: -In the monetary economy, money is considered a store of value, where it can be used as a means of saving and allocating capital. Money’s property as a store of value facilitates a transfer of purchasing power over time.