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Functions of Money - KNEC Notes and Revision Materials

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17 views

Functions of Money - KNEC Notes and Revision Materials

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Ashington Waweru
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© © All Rights Reserved
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Download as PDF, TXT or read online on Scribd
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11/10/2023, 10:36 Functions of Money - KNEC notes and Revision materials

Functions of Money
November 25, 2020 KNEC notes and Past Papers

Medium of exchange – money is generally acceptable by everybody in exchange for goods and services.it
therefore enables trade to be carried out conveniently hence reducing drawbacks of barter trade
Measure of value – when commodities are valued in terms of money,a problem of fixing exchange rate is
solved.this is because money provides a common denominator in which the values of various goods and
services are expressed.
A unit of account – money can be held for no other purpose than accounting.money is a unit by which goods
and services are valued.
Store of value – this is because it is easily convertible into other forms of assets.money can also be kept as
savings for future transactions since it is durable and relatively stable in value.
Standard of deferred payment – a debt incurred today can be paid at a later date using money.ie used to
settle future payments.
Transfer of immovable properties – using money,we are able to transfer the value of a commodity from one
person or place to another. e.g. a piece of land in Mombasa can be sold and the money received used to
acquire a piece of land of an equivalent value in another province.
Measure of wealth – wealth can be measured in monetary terms.

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