Functions of Money Lecture

Introduction

• Understanding money is essential for personal and business success.
• Money is a method of exchange, typically in the form of coins and banknotes.

Functions of Money

1. Unit of Account

   • Money provides a consistent measure of financial value.
   • Helps compare the value of goods and services, financial assets.
   • Enables comparison of prices over time and between countries.
   • Example: Comparing the price of a packet of crisps with a vegan burger.
   • Without money, bartering would be necessary, which is inefficient.

2. Means of Exchange

   • Facilitates buying and selling of goods and services.
   • Money simplifies transactions without the need for bartering.
   • Example: Trading a sofa for a PS5 would require finding a willing partner and negotiating a complex trade.

3. Store of Value

   • Money retains value over time, allowing future use.
   • People save money in banks or keep cash for future spending.
   • Ensures that saved money can maintain its purchasing power.

4. Legal Tender

   • Money is legally recognized as a valid form of payment.
   • Legal tender must be accepted for the settlement of debts.
   • Ensures that money can universally be used to buy goods and services.

Conclusion

• Understanding the functions of money is crucial for effective financial management.
• Money's roles as a unit of account, means of exchange, store of value, and legal tender facilitate economic transactions and stability.

Call to Action

• Reminder to like, share, and subscribe for more content.