Functions of money Flashcards
(6 cards)
Functions of money
What money is, how and why its used.
What are the four functions of money?
- Unit of account
- Means of exchange
- Store of value
- Legal tender
Unit of accounts definition?
Money can be used to place a value on goods and services. You exchange money for an equivalent valued good or service.
Means of exchange definition?
Money is used to sell, buy or trade goods and services, makes it simple, EXAMPLE: 100 apples for one phone.
Store of value definition?
Money has a value, that value can be stored, and used in the future, unlike an apple to would go bad, therefor loosing its value.
Legal tender definition?
Money is the legal means to pay for good and services. Its the legal national currency of a country and official method of payment.