Functions of Money in Economics

The video tutorial covers the four functions of money: unit of account, means of exchange, store of value, and legal tender. Each function is explained with examples, such as comparing prices, the barter system, saving money, and government-backed currency. The tutorial aims to prepare students for exams by helping them recall and describe these functions.

Which of the following is NOT a function of money?

• Unit of account

• Barter system

• Means of exchange

• Store of value

How does the 'unit of account' function help in comparing items?

• By providing a standard measure of value

• By allowing direct exchange of goods

• By storing wealth over time

• By ensuring legal acceptance of transactions

What is an example of the 'unit of account' function?

• Comparing the price per milliliter of two bottles of water

• Exchanging chickens for a cow

• Saving money in a bank

• Using money to pay for goods legally

What problem does the 'means of exchange' function solve?

• Lack of a standard measure of value

• Difficulty in storing wealth

• Complexity of bartering

• Legal issues in transactions

Why is money considered a better means of exchange than bartering?

• It is more valuable

• It is universally accepted

• It can be stored for longer periods

• It is backed by the government

What does the 'store of value' function allow you to do?

• Exchange goods directly

• Save money for future use

• Measure the value of items

• Ensure legal transactions

How does money act as a 'store of value'?

• By providing a standard measure

• By being a legal form of payment

• By maintaining its value over time

• By facilitating direct exchanges

What is the significance of money being a 'legal tender'?

• It can be exchanged for any item

• It is a standard measure of value

• It is legally recognized for transactions

• It can be stored indefinitely

Why can't you use chickens as a 'legal tender'?

• Chickens are not valuable

• Chickens are not backed by the government

• Chickens cannot be stored

• Chickens are not a standard measure

What ensures that money is accepted in transactions?

• Its legal backing by the government

• Its universal value

• Its ability to be stored

• Its role as a means of exchange