Three functions of money and examples

Money has several functions.

Explanation:

The first function of money is that it serves as a medium of exchange. Before the practice of buying goods in exchange of money originated it was the barter system that prevailed in the market. In this system a commodity was sold in return another commodity is gained.

There are several problems associated with this system. The exchanged commodities should be considered to be having equal value and the commodities should be really wanted by both the parties. This is called double coincidence of wants and this problem doesn't arise with money.

Another function of money is that it is a store of value. Something that holds its value over time will only be considered as a suitable medium of exchange. Money can be stored for some period but still retains its value even if situations of inflation can reduce its value. Money is a more liquid store of value because it is readily accepted in any part of the world.

Another function of money is that it acts as a unit of account. It acts as a common measure of the value of the goods and services that are exchanged.