What is the role of money in economy explain?
It acts as a standard for deferred payments. However, the most important function of money which distinguishes it from other goods is that it serves as a medium of exchange. That is, money is a means of payment for goods and services. It is this use of money that distinguishes a monetary economy from a barter economy.
Why does money play a pivotal role in modern economy?
Money Promote Division of Labour and Productivity: Money is of great importance as it promotes division of labour and productivity in the modern economies. It is this division of labour and specialisation that has made the use of more efficient machines and advanced technology possible for production of goods.
Why Is money important to the economy?
Money is a medium of exchange; it allows people to obtain what they need to live. Bartering was one way that people exchanged goods for other goods before money was created. Like gold and other precious metals, money has worth because for most people it represents something valuable.
Why Is money important in the economy?
Why Is money important for an economy?
Money serves as a medium of exchange, as a store of value, and as a unit of account. Medium of exchange. Money’s most important function is as a medium of exchange to facilitate transactions.
What are the functions of money in a modern economy quizlet?
The three functions of money are: Medium of exchange, unit of account, and store of value.
What is the importance of the money?
Money gives you freedom and choices. You can decide where and how you want to live when you have a good income or financial resources. On the other hand, when you do not have much money, choice may be something that you cannot afford. The choices available to you may not really be choices at all.
Who are the main role players of money in the economy?
The flow of money, resources and services, which characterises the economic cycle, facilitates demand and supply. The role-players in the economy include households, business, government and the foreign sector. These participants are involved in the processes of production, consumption and exchange.
How is money considered as an important economic variable?
Regardless of what form it takes, money offers us a medium of exchange for goods and services and allows the economy to grow as transactions can be completed at greater speeds.