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EconomicsMacroeconomics

List and Explain the Three Functions of Money

Money serves as a medium of exchange, a unit of account, and a store of value, making trade, price comparison, and delayed spending possible.

Question

List and explain the three functions of money.

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Evidence boundary

This answer uses the standard three-function convention in the cited Federal Reserve education materials. Some textbooks call a unit of account a measure or standard of value, and some list a standard of deferred payment as a separate fourth function. Those alternate classifications are not part of this three-function prompt. A store of value preserves purchasing power imperfectly because inflation can reduce what money buys.