Function of Money 2010

Contingent Functions
These functions are further derivatives of primary and secondary functions. These are as follows:
Basis for Economic Theories
Money is the basis for almost all economic theories. The consumption theory, production theory, utility theory, etc are all applicable because of the function of money. These theories cannot be applied to a moneyless or barter economy. They are based on assumptions that resources are priced in definite monetary terms and rationale comparison can be made between different choices of production and consumption so as to maximise profit.
13. Determination / Distribution of Nl:
With the help of money it is possible to determine national income and to analyse its distribution among various classes of society. Economists have defined many other important calculations to study economic trends such as GDP at factor cost, GDP at market prices, per capita income, personal disposable income etc. but the point to note is that these calculations can be made with sufficient reliability only in the presence of money in the economy
14. Efficiency and Optimum Allocation
Due to money it is possible to evaluate different efficiency levels. The cost of resources stated in money terms is equated with the price of the product to determine allocative and productive efficiency..
15. Basis of Credit
Money lies in the roots of banking credit system. It is in money that bank loans are expressed and advanced. Also the money value of securities are considered by banks while granting credit. Different negotiable instruments also work on the basis of money.
Other Functions
Other less important functions of money are as follows:
16. Measure of Liquidity:
With money it is possible to measure the liquidity of anything. It is stated as current asset and it is the most readily available source to pay off liabilities.
17. Determination of Solvency
Money is used to determine the solvency of any firm or company etc. To analyse that whether a business is able to pay off its debts, money value of all of its net asset is taken into consideration
Different Uses:
Money is suited for many different types of uses. It is used by consumer in variety to get satisfaction.
Summing up:
These are van. of functions which money performs, for us in the modern ' economy.