ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -6. When money prices are used to facilitate comparisons of value, money is said to function as a medium of exchange. 7. If there are four goods in a barter economy, then one needs to know 10 prices in order to exchange one good for another.

Detailed explanation-2: -Money serves as a common medium or unit of account. As various goods and services are measurable in different units such as meter, litre and gram, it becomes difficult to measure them using a common unit. Money has provided a common yardstick to measure all these different units in a common denomination known as price.

Detailed explanation-3: -Unit of Account: Unit of account means that the value of each good or service is measured in standard monetary units. The main difficulty that arose in the barter system was deciding the rate at which an exchange had to be carried out.

Detailed explanation-4: -ADVERTISEMENTS: Lastly, money acts as store of value. Money being the most liquid of all assets is a convenient form in which to store wealth, that is, money can be held as an asset. Thus store of value function is also called asset function of money.

Detailed explanation-5: -Unit of account. Money also functions as a unit of account, providing a common measure of the value of goods and services being exchanged.