Contingent Functions

Contingent Functions

These functions are further derivatives of primary and secondary functions. These are as follows:

12.      Basis for Economic Theories:

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Money is the basis for almost all economic theories. The consumption theory, production theory, utility theory, etc are all applicable because of Jhe 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 feetor 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 ,ahd advanced. Also the rabney value of securities are considered by banks • while granting credit. Different negotiable instruments a|so 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 lajuidjty of anything, ft 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 ^ net asset is taken 'into, consideration.

Mow?Banking & Finance

18.     Different Uses:

Money is suited for many different types of Uses. It is used by consumer in variety of ways to get satisfaction.

Summing up:

These are vari; of functions which money performs, for us in'the ihodern economy.