we use the term Money to refer to any generally accepted medium of exchange to anything that is, that will be accepted by virtually everyone in exchange for goods and services.it is customary to distinguish between money’s several different functions. The reason for to each of these functions.The major functions of money are to act as a medium of exchange, as a store of wealth, and as a unit of account.
A Medium Of Exchange
An important function of money is to facilitate exchange.Without money, our complicated economic system, which is based on specialization and the division of labor, would be impossible, and we would have to return to a very primitive form of production and exchange.it is not without justification that money has been called one of the great invention contributing to human freedom. If there were no money,goods would have to be exchanged by trade by barter, one good being swapped directly for another.This system is a cumbersome one in which every transaction requires a double coincidence of wants.If I have a donkey to trade, for example, I must search not only for a man who wants things that I would like to acquire.Futhermore , there is no way to give change on the transaction.if I find someone who wants my donkey, we must agree on a swap rate.if we decide that a donkey is worth nine chickens, then we are in trouble if my trading partner has only six chickens: I can hardly give him two-third of my donkey.Thus, goods that are not readily divisible make poor subject for barter,we would have to spend a great deal of time searching for satisfactory transaction;we would be unable to specilise in the producing some commodity, for we could not be certain that we could obtain when we wanted them all the other goods that we required.
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