Functions of money
Definition
The three essential roles that money serves in an economy: as a medium of exchange (used to buy and sell goods), a unit of account (a common measure of value), and a store of value (a way to save purchasing power for the future).
Examples
- Using dollars to purchase groceries instead of bartering chickens for bread (medium of exchange)
- Comparing the price of a car at $25,000 versus a bicycle at $500 (unit of account)
- Putting money in a savings account to use next year (store of value)
Study This Concept
Practice functions of money with free review games in these units: