Functions/Characteristics of Money
Functions of Money:
1. Medium of Exchange: This is the primary function of money, a means of payment for goods and services as well as settlement of debt.
2. Measurement of Value and Unit of Account: It helps in putting prices or values to goods and services, and also helps in keeping financial records of all business transactions. The real value of money is what it can buy at a particular time.
3. Store of Value: This makes the accumulation of wealth possible because money can be kept or saved for future use without any loss of value. In a period of inflation, money becomes a very poor store of value.
4. Standard for Deferred Payment: Money has helped to create credit in business transactions because goods and services can be bought now and payments made in the future. It makes payment to be postponed from the present to a future date.
Characteristics of Money:
1. Acceptability: It must be generally acceptable to the people of that country, community or a certain territory.
2. Divisibility: It must capable of being divided into smaller units e.g. naira and kobo.
3. Homogeneity: It must be the same in all aspects.
4. Recognisability: The users should be able to recognize or notice it, there should not be confusion in money of the same denomination.
5. Portability: Money should be very easy to carry about, it must not be too heavy.
6. Storability: It must be capable of being stored for a long time without physical deterioration.
7. Relatively Scarce: In order for money not to lose its value, it must be relatively scarce.
1. Identify the problems of the barter system.
2. Explain five qualities of good money.