Function Of Money

The first function of money is the medium of exchange. This is when money is used to exchange for goods and services. Consumers use money to purchase goods that are necessary and goods that they want. Sellers give goods in exchange for money and use that money to provide for themselves and their families and to buy more goods to sale. I use this function of money to buy food for my family and pay rent, the water bill, the power bill and the gas bill.

The second function of money is the unit of account. This function is the measure of value for goods, or the price that you have to pay in order to purchase goods, in our case the US dollar. A seller will measure the value of a good and what a buyer is willing to pay in order to receive a good. This can set the market value of a good so that depending on where you attempt to purchase this good you will pay a small margin of differences. This is true with the exception of the Internet. As the buyer of in this function I purchase goods that sellers determine the price for. For instance, I buy most of my families food from either Walmart or Sams. The difference between these two stores is that Sams sells and bulk and for the most part is only a few dollars more than Walmart. I have to determine if I want to buy such high quantity of a product or if I am willing to pay less at Walmart and get less.

The third function of money is the store of value. This is when money is postponed from using or consuming goods until a later date. For instance when you make money and put some of this money away for a late time this is the store of value. In this function I earn a pay check and put 10% of that check into my savings account to use at another time such as Christmas or retirement.