A1 What is Money?

We all use money in the form of notes and coins. Many of you may now be using bank accounts and even debit cards to access your money. You probably wish you had more of it to buy the things you desire but what is it? Before the invention of money, trade happened through a barter system. This meant that in order to buy a good or service, you would have to exchange it with a another good or service.

Functions of Money

Money acts as a unit of Account. This means that the value of an item can be quantified in terms of its monetary value. This can help you make a decision on whether you can afford a product or how much of it you are willing to buy.

Money acts as a means of Exchange. This simply means that you swap your money for a good or a service.

Money acts as a store of Value. This means that you can hold onto it to spend when you are ready. E.g. if somebody gives you $100 today and you don’t want to spend it straight away, it will still be worth $100.

Money is recognised as legal tender. This means that it has been approved by courts of law to settle any debt.

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A Influences on the Role of Money