Money fulfils a series of basic functions in the economic system. The most important is to serve as a medium of exchange in transactions.
For its use as a means of payment to be effective, the money must be:
- Commonly accepted and trustworthy
- Easily transportable
- Divisible
- Non-perishable, unalterable in time
- Difficult to fake
In addition, money serves as a unit of account or measure: Money allows the value of goods and services to be measured. Most of goods and services are valued in money, which makes it possible to compare the value of different goods or to account for the GDP of a country.
Money also serves as a store of value, allowing it to accumulate for future payments. The part of money that is not spent today, can be put aside for future use, and that is called savings.
