Following are the main functions of money:
(i) Medium of exchange It is a very important and main function of money. Any commodity can be purchased or sold through the medium of money. In other words, money becomes the representative of general purchasing power. It is the function of money which has made the work of exchange easy because money has the merit of general acceptability.
(ii) Measure of value Money serves as a common measure of value or a standard of value. Value of all goods and services are expressed in terms of money, e.g. the price of a pen as Rs 5 the price of a book as Rs 10, etc. It is also referred to as unit of account function of money.
(iii) Store of value Wealth can be conveniently stored in the form of money because value of money remains relatively stable, compared to other commodities and storage of money does not need much space. In other words, everybody saves some part of his income to fulfil the various objectives of the future, it is known as store of value.
(iv) Standard of deferred payments Money serves as the measure by which the value of future payments is regulated. In modern economic system, loans are generally given and taken and the repayment is generally postponed for a future date. Money has made such transactions easy.