1. Medium of exchange: Money can be used for buying and selling goods and services. If there were no money, goods would have to be exchanged through the process of barter (goods would be traded for other goods in transactions arranged on the basis of mutual need). For example: If I raise chickens and want to buy cows, I would have to find a person who is willing to sell his cows for my chickens. Such arrangements are often difficult. But Money eliminates the need of the double coincidence of wants.
2. Unit of account: Money is the common standard for measuring relative worth of goods and service.
3. Store of value: Money is the most liquid asset (Liquidity measures how easily assets can be spent to buy goods and services). Money’s value can be retained over time. It is a convenient way to store wealth.
The 3 function of money are as the medium of the exchange, an unit of an account, and the store of value.
The money is used as a medium of exchange as earlier it was used for the exchange of it. The money is now a store of the value, with time. A unit of account is backed by a commodity. It is also used as a standard for defferd payments.
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