Functions of Money: The Unit of Account for Measuring Value
Money plays a crucial role in our everyday lives, serving various functions that enable economic transactions and facilitate the exchange of goods and services. One essential function of money is its role as a unit of account, providing a standardized measure of value. In this article, we will explore the functions of money, with a focus on its role as a unit of account.
What is a Unit of Account?
A unit of account is a standardized measure that allows us to assign value to goods, services, and assets in a consistent and universally understandable way. It serves as a common denominator for comparing the worth of different items and facilitates economic calculations and transactions.
Money as a Unit of Account:
Money serves as a unit of account by providing a common standard for measuring and comparing the value of different goods and services. Here are some key functions of money in this regard:
1. Pricing and Valuation:
- Money allows us to assign a price to goods and services, making it easier to compare their relative value. It provides a universal medium through which all items can be priced in a consistent manner.
2. Record Keeping:
- Money as a unit
