{"id":32051,"date":"2021-09-28T14:06:49","date_gmt":"2021-09-28T14:06:49","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=32051"},"modified":"2026-03-04T17:30:44","modified_gmt":"2026-03-04T17:30:44","slug":"function-and-definition-of-money","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/function-and-definition-of-money\/","title":{"rendered":"Function and Definition 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, and goods are purchased. Which option is correct?\",\n    \"text\": \"Money should be able to provide terms in which: I. prices are quoted; II. debts are recorded; III. purchasing power is transferred from the present to the future; IV. goods are purchased. Which of the following combinations is correct?\",\n    \"answerCount\": 3,\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"text\": \"The correct answer is C. Money should be able to perform all these functions. It acts as a unit of account for quoting prices and recording debts, a store of value for transferring purchasing power over time, and a medium of exchange for purchasing goods and services.\"\n    },\n    \"suggestedAnswer\": [\n      {\n        \"@type\": \"Answer\",\n        \"text\": \"I & II only.\"\n      },\n      {\n        \"@type\": \"Answer\",\n        \"text\": \"I, III & IV only.\"\n      },\n      {\n        \"@type\": \"Answer\",\n        \"text\": \"I, II, III & IV.\"\n      }\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 (2025 Level I CFA\u00ae Exam \u2013 Economics \u2013 Module 5)\",\n  \"description\": \"Level I CFA\u00ae Program video lessons offered by AnalystPrep.\",\n  \"uploadDate\": \"2022-03-25\",\n  \"thumbnailUrl\": \"https:\/\/img.youtube.com\/vi\/opwhOwJygDA\/maxresdefault.jpg\",\n  \"contentUrl\": \"https:\/\/www.youtube.com\/watch?v=opwhOwJygDA\",\n  \"embedUrl\": \"https:\/\/www.youtube.com\/embed\/opwhOwJygDA\",\n  \"duration\": \"PT31M45S\"\n}\n<\/script>\n\n\n\n\n<iframe loading=\"lazy\" width=\"560\" height=\"315\" src=\"https:\/\/www.youtube.com\/embed\/opwhOwJygDA?si=hwaIUWFAEN8eMQSh\" 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<h2><strong>Definitions of Money<\/strong><\/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><strong>Functions of Money<\/strong><\/h2>\n<h4><strong>1. Store of Value<\/strong><\/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><strong>2. Unit of Account<\/strong><\/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><strong>3. Medium of Exchange<\/strong><\/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<ol style=\"list-style-type: upper-alpha;\">\n<li>I &amp; II only<\/li>\n<li>&nbsp;I, III &amp; IV only<\/li>\n<li>&nbsp;I, II, III &amp; IV<\/li>\n<\/ol>\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<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>\n","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":15,"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-32051","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 and Definition of Money | CFA Level I Notes<\/title>\n<meta name=\"description\" content=\"Learn the definition of money and its key functions in economics, including medium of exchange, unit of account, and store of value.\" \/>\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\/function-and-definition-of-money\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Functions and Definition of Money | CFA Level I Notes\" \/>\n<meta property=\"og:description\" content=\"Learn the definition of money and its key functions in economics, including medium of exchange, unit of account, and store of value.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/function-and-definition-of-money\/\" \/>\n<meta property=\"og:site_name\" content=\"AnalystPrep | CFA\u00ae Exam Study Notes\" \/>\n<meta property=\"article:published_time\" content=\"2021-09-28T14:06:49+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-03-04T17:30:44+00:00\" \/>\n<meta name=\"author\" content=\"Kosikos Tuitoek\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Kosikos Tuitoek\" \/>\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\/function-and-definition-of-money\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/function-and-definition-of-money\/\"},\"author\":{\"name\":\"Kosikos Tuitoek\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/73df713e3b6e82ee139e1eff20cebe20\"},\"headline\":\"Function and Definition of Money\",\"datePublished\":\"2021-09-28T14:06:49+00:00\",\"dateModified\":\"2026-03-04T17:30:44+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/function-and-definition-of-money\/\"},\"wordCount\":345,\"articleSection\":[\"Economics\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/function-and-definition-of-money\/\",\"url\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/function-and-definition-of-money\/\",\"name\":\"Functions and Definition of Money | CFA Level I Notes\",\"isPartOf\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#website\"},\"datePublished\":\"2021-09-28T14:06:49+00:00\",\"dateModified\":\"2026-03-04T17:30:44+00:00\",\"author\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/73df713e3b6e82ee139e1eff20cebe20\"},\"description\":\"Learn the definition of money and its key functions in economics, including medium of exchange, unit of account, and store of value.\",\"breadcrumb\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/function-and-definition-of-money\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/function-and-definition-of-money\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/function-and-definition-of-money\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Function and Definition 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\/73df713e3b6e82ee139e1eff20cebe20\",\"name\":\"Kosikos Tuitoek\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/8260edaa3f7ba04cf6b536b3f7fd769007ecb789b3289ac0cc4c3ab8b3f7f061?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/8260edaa3f7ba04cf6b536b3f7fd769007ecb789b3289ac0cc4c3ab8b3f7f061?s=96&d=mm&r=g\",\"caption\":\"Kosikos Tuitoek\"},\"url\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/author\/kosikos-tuitoek-enockanalystprep-com\/\"}]}<\/script>\n<meta property=\"og:video\" content=\"https:\/\/www.youtube.com\/embed\/opwhOwJygDA\" \/>\n<meta property=\"og:video:type\" content=\"text\/html\" \/>\n<meta property=\"og:video:duration\" content=\"1906\" \/>\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=\"2021-09-28T14:06:49+00:00\" \/>\n<meta property=\"ya:ovs:allow_embed\" content=\"true\" \/>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Functions and Definition of Money | CFA Level I Notes","description":"Learn the definition of money and its key functions in economics, including medium of exchange, unit of account, and store of value.","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\/function-and-definition-of-money\/","og_locale":"en_US","og_type":"article","og_title":"Functions and Definition of Money | CFA Level I Notes","og_description":"Learn the definition of money and its key functions in economics, including medium of exchange, unit of account, and store of value.","og_url":"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/function-and-definition-of-money\/","og_site_name":"AnalystPrep | CFA\u00ae Exam Study Notes","article_published_time":"2021-09-28T14:06:49+00:00","article_modified_time":"2026-03-04T17:30:44+00:00","author":"Kosikos Tuitoek","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Kosikos Tuitoek","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/function-and-definition-of-money\/#article","isPartOf":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/function-and-definition-of-money\/"},"author":{"name":"Kosikos Tuitoek","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/73df713e3b6e82ee139e1eff20cebe20"},"headline":"Function and Definition of Money","datePublished":"2021-09-28T14:06:49+00:00","dateModified":"2026-03-04T17:30:44+00:00","mainEntityOfPage":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/function-and-definition-of-money\/"},"wordCount":345,"articleSection":["Economics"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/function-and-definition-of-money\/","url":"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/function-and-definition-of-money\/","name":"Functions and Definition of Money | CFA Level I Notes","isPartOf":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#website"},"datePublished":"2021-09-28T14:06:49+00:00","dateModified":"2026-03-04T17:30:44+00:00","author":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/73df713e3b6e82ee139e1eff20cebe20"},"description":"Learn the definition of money and its key functions in economics, including medium of exchange, unit of account, and store of value.","breadcrumb":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/function-and-definition-of-money\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/function-and-definition-of-money\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/economics\/function-and-definition-of-money\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/analystprep.com\/cfa-level-1-exam\/"},{"@type":"ListItem","position":2,"name":"Function and Definition 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\/73df713e3b6e82ee139e1eff20cebe20","name":"Kosikos Tuitoek","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/8260edaa3f7ba04cf6b536b3f7fd769007ecb789b3289ac0cc4c3ab8b3f7f061?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/8260edaa3f7ba04cf6b536b3f7fd769007ecb789b3289ac0cc4c3ab8b3f7f061?s=96&d=mm&r=g","caption":"Kosikos Tuitoek"},"url":"https:\/\/analystprep.com\/cfa-level-1-exam\/author\/kosikos-tuitoek-enockanalystprep-com\/"}]},"og_video":"https:\/\/www.youtube.com\/embed\/opwhOwJygDA","og_video_type":"text\/html","og_video_duration":"1906","og_video_width":"480","og_video_height":"270","ya_ovs_adult":"false","ya_ovs_upload_date":"2021-09-28T14:06:49+00:00","ya_ovs_allow_embed":"true"},"_links":{"self":[{"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/posts\/32051","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\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/comments?post=32051"}],"version-history":[{"count":5,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/posts\/32051\/revisions"}],"predecessor-version":[{"id":59372,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/posts\/32051\/revisions\/59372"}],"wp:attachment":[{"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/media?parent=32051"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/categories?post=32051"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/tags?post=32051"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}