{"id":1165,"date":"2021-10-10T20:04:00","date_gmt":"2021-10-10T20:04:00","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=1165"},"modified":"2026-03-08T10:52:18","modified_gmt":"2026-03-08T10:52:18","slug":"describe-functions-definitions-money","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/","title":{"rendered":"Functions and Definitions of Money"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"QAPage\",\n  \"mainEntity\": {\n    \"@type\": \"Question\",\n    \"name\": \"Money should be able to provide terms in which prices are quoted, debts are recorded, purchasing power is transferred from the present to the future, or goods are purchased.\",\n    \"text\": \"Money should be able to provide terms in which:\\n\\nI. prices are quoted;\\n\\nII. debts are recorded;\\n\\nIII. purchasing power is transferred from the present to the future; or\\n\\nIV. goods are purchased.\\n\\nA. I & II only\\n\\nB. I, III & IV only\\n\\nC. I, II, III & IV\",\n    \"answerCount\": 1,\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"text\": \"The correct answer is C. Money should be able to perform all the functions listed in points I to IV. Money acts as a unit of account (prices are quoted and debts are recorded), a store of value (purchasing power can be transferred from the present to the future), and a medium of exchange (goods and services are purchased).\"\n    }\n  }\n}\n<\/script>\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"VideoObject\",\n  \"name\": \"Monetary and Fiscal Policy (2022 Level I CFA\u00ae Exam \u2013 Reading 12)\",\n  \"description\": \"This video covers monetary and fiscal policy, exploring their differences, tools, and impacts on economic stability. Key topics include money creation, the Fisher effect, central bank roles, inflation types, monetary transmission mechanisms, fiscal policy challenges, and the interaction between fiscal and monetary policies.\",\n  \"uploadDate\": \"2018-11-12T00:00:00+00:00\",\n  \"thumbnailUrl\": \"https:\/\/img.youtube.com\/vi\/KKHi1HKTpD4\/maxresdefault.jpg\",\n  \"contentUrl\": \"https:\/\/www.youtube.com\/watch?v=KKHi1HKTpD4\",\n  \"embedUrl\": \"https:\/\/www.youtube.com\/embed\/KKHi1HKTpD4\",\n  \"duration\": \"PT29M18S\"\n}\n<\/script>\n\n\n\n<iframe loading=\"lazy\" width=\"560\" height=\"315\" src=\"https:\/\/www.youtube.com\/embed\/KKHi1HKTpD4?si=ir33GceqPCpOqTsw\" title=\"YouTube video player\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n\n\n<h2>Definitions of Money<\/h2>\n<p>According to Growther, money refers to anything that is generally accepted as a means of exchange. What\u2019s more, it is that which at the same time acts as a measure and store of value.<\/p>\n<p>John Maynard Keynes defines it as \u201cthat by delivery of which debts-contract and price-contracts are discharged, and in the shape of which a store of General Purchasing Power is held.\u201d<\/p>\n<p>Another economist named Alfred Marshal argues that money includes all things that are \u201ccurrent without doubt or special inquiry as a means of purchasing commodities and services and of defraying expenses.\u201d<\/p>\n<h2>Functions of Money<\/h2>\n<h4>1. Store of Value<\/h4>\n<p>Money is a way of transferring purchasing power from the present to the future. Money is not perishable; therefore, it can act as a store of wealth.<\/p>\n<h4>2. Unit of Account<\/h4>\n<p>Money provides the terms that make price quotation and debt recording possible. Money is a yardstick with which we measure economic transactions. With the function of money as a unit of measurement, a unitary value and a measure of value can be ascribed to goods and services.<\/p>\n<h4>3. Medium of Exchange<\/h4>\n<p>Money plays the role of the tool we use to buy goods and services. When money serves as a medium of exchange, it is used as a liquid asset and a debt settlement tool. For money to serve this purpose, it must have the following properties:<\/p>\n<ul>\n<li>money should be readily acceptable;<\/li>\n<li>money should have a known value;<\/li>\n<li>money should be easily divisible;<\/li>\n<li>money must have a high value relative to its weight; and<\/li>\n<li>money should be difficult to counterfeit.<\/li>\n<\/ul>\n<blockquote>\n<h2>Question<\/h2>\n<p>Money should be able to provide terms in which:<\/p>\n<p>I. prices are quoted;<\/p>\n<p>II. debts are recorded;<\/p>\n<p>III. purchasing power is transferred from the present to the future; or<\/p>\n<p>IV. goods are purchased.<\/p>\n<p>A. I &amp; II only<\/p>\n<p>B. I, III &amp; IV only<\/p>\n<p>C. I, II, III &amp; IV<\/p>\n<p>Solution<\/p>\n<p>The correct answer is C.<\/p>\n<p>Money should be able to do all of the things mentioned in points I to IV.<\/p>\n<\/blockquote>\n<p><em>Reading 16 LOS 16b: <\/em><\/p>\n<p><em>Describe functions and definitions of money<\/em><\/p>\n<div class=\"notes_inv\"><hr \/>\n<p><a href=\"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/learning-sessions-curriculum-economics\/\"><em>Economics &#8211; Learning Sessions<\/em><\/a><\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>Definitions of Money According to Growther, money refers to anything that is generally accepted as a means of exchange. What\u2019s more, it is that which at the same time acts as a measure and store of value. John Maynard Keynes&#8230;<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4],"tags":[],"class_list":["post-1165","post","type-post","status-publish","format-standard","hentry","category-economics","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Functions of Money Explained | CFA Level 1 Economics<\/title>\n<meta name=\"description\" content=\"Explore the functions of money, including the store of value and medium of exchange. Understand key definitions\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Functions of Money Explained | CFA Level 1 Economics\" \/>\n<meta property=\"og:description\" content=\"Explore the functions of money, including the store of value and medium of exchange. Understand key definitions\" \/>\n<meta property=\"og:url\" content=\"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/\" \/>\n<meta property=\"og:site_name\" content=\"AnalystPrep | CFA\u00ae Exam Study Notes\" \/>\n<meta property=\"article:published_time\" content=\"2021-10-10T20:04:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-03-08T10:52:18+00:00\" \/>\n<meta name=\"author\" content=\"Brian Masibo\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Brian Masibo\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/\"},\"author\":{\"name\":\"Brian Masibo\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/224cadd695f477a293f18471cf4e4183\"},\"headline\":\"Functions and Definitions of Money\",\"datePublished\":\"2021-10-10T20:04:00+00:00\",\"dateModified\":\"2026-03-08T10:52:18+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/\"},\"wordCount\":355,\"articleSection\":[\"Economics\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/\",\"url\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/\",\"name\":\"Functions of Money Explained | CFA Level 1 Economics\",\"isPartOf\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#website\"},\"datePublished\":\"2021-10-10T20:04:00+00:00\",\"dateModified\":\"2026-03-08T10:52:18+00:00\",\"author\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/224cadd695f477a293f18471cf4e4183\"},\"description\":\"Explore the functions of money, including the store of value and medium of exchange. Understand key definitions\",\"breadcrumb\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Functions and Definitions of Money\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#website\",\"url\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/\",\"name\":\"AnalystPrep | CFA\u00ae Exam Study Notes\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/224cadd695f477a293f18471cf4e4183\",\"name\":\"Brian Masibo\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2016\/09\/stefan-150x150.png\",\"contentUrl\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2016\/09\/stefan-150x150.png\",\"caption\":\"Brian Masibo\"},\"url\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/author\/brian-masibo\/\"}]}<\/script>\n<meta property=\"og:video\" content=\"https:\/\/www.youtube.com\/embed\/KKHi1HKTpD4\" \/>\n<meta property=\"og:video:type\" content=\"text\/html\" \/>\n<meta property=\"og:video:duration\" content=\"1759\" \/>\n<meta property=\"og:video:width\" content=\"480\" \/>\n<meta property=\"og:video:height\" content=\"270\" \/>\n<meta property=\"ya:ovs:adult\" content=\"false\" \/>\n<meta property=\"ya:ovs:upload_date\" content=\"2021-10-10T20:04:00+00:00\" \/>\n<meta property=\"ya:ovs:allow_embed\" content=\"true\" \/>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Functions of Money Explained | CFA Level 1 Economics","description":"Explore the functions of money, including the store of value and medium of exchange. Understand key definitions","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/","og_locale":"en_US","og_type":"article","og_title":"Functions of Money Explained | CFA Level 1 Economics","og_description":"Explore the functions of money, including the store of value and medium of exchange. Understand key definitions","og_url":"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/","og_site_name":"AnalystPrep | CFA\u00ae Exam Study Notes","article_published_time":"2021-10-10T20:04:00+00:00","article_modified_time":"2026-03-08T10:52:18+00:00","author":"Brian Masibo","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Brian Masibo","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/#article","isPartOf":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/"},"author":{"name":"Brian Masibo","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/224cadd695f477a293f18471cf4e4183"},"headline":"Functions and Definitions of Money","datePublished":"2021-10-10T20:04:00+00:00","dateModified":"2026-03-08T10:52:18+00:00","mainEntityOfPage":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/"},"wordCount":355,"articleSection":["Economics"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/","url":"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/","name":"Functions of Money Explained | CFA Level 1 Economics","isPartOf":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#website"},"datePublished":"2021-10-10T20:04:00+00:00","dateModified":"2026-03-08T10:52:18+00:00","author":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/224cadd695f477a293f18471cf4e4183"},"description":"Explore the functions of money, including the store of value and medium of exchange. Understand key definitions","breadcrumb":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/describe-functions-definitions-money\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/analystprep.com\/cfa-level-1-exam\/"},{"@type":"ListItem","position":2,"name":"Functions and Definitions of Money"}]},{"@type":"WebSite","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#website","url":"https:\/\/analystprep.com\/cfa-level-1-exam\/","name":"AnalystPrep | CFA\u00ae Exam Study Notes","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/analystprep.com\/cfa-level-1-exam\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/224cadd695f477a293f18471cf4e4183","name":"Brian Masibo","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/image\/","url":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2016\/09\/stefan-150x150.png","contentUrl":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2016\/09\/stefan-150x150.png","caption":"Brian Masibo"},"url":"https:\/\/analystprep.com\/cfa-level-1-exam\/author\/brian-masibo\/"}]},"og_video":"https:\/\/www.youtube.com\/embed\/KKHi1HKTpD4","og_video_type":"text\/html","og_video_duration":"1759","og_video_width":"480","og_video_height":"270","ya_ovs_adult":"false","ya_ovs_upload_date":"2021-10-10T20:04:00+00:00","ya_ovs_allow_embed":"true"},"_links":{"self":[{"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/posts\/1165","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/comments?post=1165"}],"version-history":[{"count":17,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/posts\/1165\/revisions"}],"predecessor-version":[{"id":59479,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/posts\/1165\/revisions\/59479"}],"wp:attachment":[{"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/media?parent=1165"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/categories?post=1165"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/tags?post=1165"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}