What are the main functions of money, International Economics

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Q. What are the main functions of money?

Answer: Money serves generally three important functions that are a unit of account, a medium of exchange and a store of value.

As medium of exchange money evade going back to a barter economy with the enormous search costs connected with it. Like a unit of account the use of money economizes on the number of prices an individual faces. Consider a financial system with N goods then one need only (N- 1) prices. Like a store of value the use of money in general ensures that you can transfer wealth between periods.


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