Money does three dimensional functions – primary, secondary and contingent functions.
Primary functions : There are two primary functions
Medium of exchange: It acts as a medium of exchange, for getting any goods and services needed for the family by servicing as a means of a payment. Money has free trade from the inconveniences of barter system.
Standard of value: Money is a scale in which the value of goods and services is measured. Money has brought a price system for the goods. The value of money denotes the worth of the product or the price of the product.
Secondary functions:
There are three secondary functions of money.
Standard of deferred payment: money helps in payment at a cater date and the amount to be paid is determined in terms of money
Store of value: A person can hold money at any length of time and serve as income for his future use.
Transfer of value: we can transfer money from one place to another and one person to another.
Contingent functions:
The contingent factions are
Distributions of national income: Money helps in the distribution of national income in the form of payments such as wages, interest and profits.
Equalizations of marginal utility: money helps both consumer as well as producer maximizing the satisfactions.
Basis of credit system: Modern economy is based on credit system that is one can take loan and pay it back with interest.
Liquidity and uniformity to all forms of capital and wealth: Money is the most needed asset and all kinds of wealth can be held or converted in to money.
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