Of money’s three functions, the one that distinguishes money from other assets is its function as a
medium of exchange.
medium of exchange.
Money has three primary functions: a medium of exchange, a unit of account, and a store of value.
A medium of exchange is something that is widely accepted as a means of payment for goods or services. Money plays this role by serving as a common currency that buyers and sellers can use to facilitate transactions. It eliminates the need for the barter system, where goods and services are directly exchanged for other goods and services, which can be inconvenient and time-consuming.
The other two functions of money, a unit of account and a store of value, are important, but not unique to money. A unit of account is a way of measuring the value of things, such as prices and wages. For example, we can use money as a unit of account to measure how much a gallon of milk or a haircut costs. A store of value means that money can be stored and used to make purchases in the future, without losing its purchasing power due to inflation or other economic factors. However, other assets, such as gold or real estate, can also serve as a store of value.
Therefore, it is the function of money as a medium of exchange that distinguishes it from other assets.
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