Which is not the function of money
- Make demand and supply equal
- Store of value
- Medium of exchange
- Measure of value
Correct answer: a. Make demand and supply equal
Answer Explanation
The correct answer is a. Make demand and supply equal. In an economy, money serves a variety of functions, such as being a medium of exchange, a store of value, and a measure of value, but it does not directly contribute to equalizing supply and demand.
Rather than by the existence of money, various factors determine the equilibrium between demand and supply, including market forces, consumer preferences, and production levels.
Why the other options are not correct
b. Store of value:
Money acts as a store of value, meaning it can be saved and held for future use. Money retains its value over time, which allows people to make purchases or invest in the future. Despite the fact that other assets (such as real estate, gold, stocks) can also serve as stores of value, money’s liquidity and stability make it an ideal choice for storing wealth.
c. Medium of exchange:
In addition to serving as a medium of exchange, money serves as a common acceptance medium for transactions. Money facilitates the exchange of goods and services by acting as a commonly accepted medium. In contrast to bartering (direct exchange of goods), people use money to buy and sell goods and services. As a result, trade is simplified and transactions become more efficient.
d. Measure of Value:
Individuals can express the worth or value of goods and services in monetary terms when money is used as a measure of value. It is easier to compare the relative values of different goods and services when prices are stated in a particular currency. A common unit of account allows individuals and businesses to compare the prices of a wide range of products.
Conclusion
In conclusion, money is a multifunctional tool in an economy, acting as a medium of exchange, a store of value, and a measure of value. However, it does not make demand and supply equal directly. Demand and supply in an economy are determined by several factors, including market dynamics, consumer behavior, and production levels.
Besides facilitating economic transactions, money can also be used to store wealth and compare the value of goods and services easily. In order to understand how money supports economic activities and promotes economic stability, it is important to understand its functions.