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- It acts as a medium of exchange. This is the most important function of money. All sales and purchases take place through the use of money. It has eliminated the problem of double coincidence of wants involved in the barter system.
- Money is accepted as a common measure of value. Money helps in expressing the price of any commodity which was not possible in the barter system where people used to exchange goods with one another without the involvement of money. Now the value of any commodity can be expressed in terms of money. Money assigns a value to any good or commodity.
- Money also acts as a means to transfer of value. Value can be transferred from one person to another with the help of money. Money has high efficiency in transferring the values from one place to another or even from one country to another.
- Money has made the distribution of national income easier. The liquidity of capital can be maintained with the use of money which has a general acceptability. It also facilitates the credit system in an economy.
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