Functions of currency are as follows:
1. Medium of exchange: Money acts as a medium of exchange for the sale and purchase of goods and services. In the absence of money, goods were exchanged for goods. This required double coincidence of wants. Introduction of money has separated the acts of sale and purchase.
2. Measure of value: Money serves as a unit of account. It means that the value of each good or service is measured in the monetary unit.
3. Standard of deferred payments: Deferred payments refer to those payments which are made sometimes in the future. Money has made deferred payments much easier than before. When we borrow money from somebody, we have to return both the principal as well as interest amount, sometimes in future. Money is convenient mode of these payments. It is difficult to make such payments in terms of goods and services.
4. Store of value: Storing of wealth has become considerably easy with the introduction of money. Wealth can be stored just in terms of paper titles like FDR.
5. Transfer of value: Money serves as a convenient mode of transfer of value. It can be conveniently transferred to any part of the world.
