State and explain any three functions of money. - Leaving Cert Economics - Question 4(a) - 2018
Question 4(a)
State and explain any three functions of money.
Worked Solution & Example Answer:State and explain any three functions of money. - Leaving Cert Economics - Question 4(a) - 2018
Step 1
Medium of exchange
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Answer
Money serves as a medium of exchange, allowing individuals to facilitate transactions seamlessly. Unlike barter systems, which require a double coincidence of wants, money eliminates this issue by providing a universally accepted medium, enabling people to buy and sell goods and services without direct trade.
Step 2
Measure of Value
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Answer
Money functions as a measure of value by providing a standard unit for pricing different goods and services. This helps in comparing the value of diverse items, making it easier for consumers to make informed purchasing decisions. For instance, prices in monetary terms reflect the relative worth of products in the marketplace.
Step 3
Store of Wealth
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Answer
Money acts as a store of wealth, allowing individuals to save their earnings and defer consumption to a future date. Unlike perishable goods, money maintains its value over time, enabling people to accumulate resources for future needs or investments.
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