Money Functions

Secondary Functions

. Besides the primary .functions, money also performs different secondary functions. Such functions depict the role that money plays in the economy.

5. Market Mechanism

Money is at the base of market mechanism. In other words market mechanism and the forces of demand and supply works only because of money. Money is the factor that leads to the meeting of demand and supply and determination of prices

6. Income and Consumption

All economic variable including income and consumption are determined and quoted in terms of money. Money helps in determination, valuation and budgeting of expanses and revenues.

7. Instrument of Modern Economy

Money is the basic and most important instruments of modern economy. All the economic policies are applicable only because of the fact that it is possible to state the price of everything in term of money.

8. Monetary and Fiscal Management

Money is an important element of monetary and fiscal policies of government. It plays its role in all kinds of economic actions taken by government. In fact taxes and public finance can only be generated because money is present in our economy.

•9. Aids to Economic Activities

" All kinds of economic activities such as investments, savings, credit, advances, purchases, sales are made in term of money. It has facilitated the process of expansion of trade and commerce. It has acted as a lubricant in the economy. It is a driving force of economic indicators . It has made business and trading operations, flexible.

10.

Secondary Functions:

. Besides the primary .functions, money also performs different secondary functions. Such functions depict the role that money plays in the economy.

5. Market Mechanism:

Money is at the base of market mechanism. In other words market mechanism and the forces of demand and supply works only because of money. Money is the factor that leads to the meeting of demand and supply and determination of prices.

6. Income and Consumption:

All economic variable including income and consumptipn are determined and quoted in terms of money. Money helps in determination, valuation and budgeting of expanses and revenues.

7. Instrument of Modern Economy:

Money is the basic and most important instruments of modern economy. All the economic policies are applicable only because of the fact that it is possible to state the price of everything in term of money.

8. Monetary and Fiscal Management:

Money is an important element of monetary and fiscal policies of government. It plays its role in all kinds of economic actions taken by government. In fact taxes and public finance can only be generated because money is present in our economy.

•9. Aids to Economic Activities:

" All kinds of economic activities such as investments, savings, credit, advances, purchases, sales are made in term of money. It has facilitated the process of expansion of trade and commerce. It has acted as a lubricant in the economy. It is a driving force of economic indicators . It has made business and trading operations, flexible.

10. Specialisation and Trade:

Money has made specialisation possible. Previously, there was a concept of self sufficiency. But in today's world, nations tend to specialise in the production of things in which they have comparative advantage and then they trade what they have produced for what they need. This is possible because different resources can be priced in terms of money. This helps in the calculation of cost of production and the determination of comparative advantages. .

11. Liquidity to international trade:

Money has provided the liquidity to international trade. The wealth can be transferred readily from one country to another. Payment can be made and received on the other end of world in no time. Bank money has made the, international trade more .brisk and much more secure. It has also simplified the task of accumulation of reserves by the governments. Besides accumulating gold and silver governments also bold foreign exchange(currency of stronger countries) as reserves.

Money has made specialization possible. Previously, there was a concept of self sufficiency. But in today's world, nations tend to specialist in the production of things in which they have comparative advantage and then they trade what they have produced for what they need. This is possible because different resources can be priced in terms of money. This helps in the calculation of cost of production and the determination of comparative advantages. .

11. Liquidity to international trade

Money has provided the liquidity to international trade. The wealth can be transferred readily from one country to another. Payment can be made and received on the other end of world in no time. Bank money has made the, international trade more .brisk and much more secure. It has also simplified the task of accumulation of reserves by the governments. Besides accumulating gold and silver governments also bold foreign exchange(currency of stronger countries) as reserves.