Functions of Money

Money conventionally performs three core functions: medium of exchange, unit of account, and store of value.

As a medium of exchange, money is used to make payments for goods and services.

As a unit of account, money provides a common measure in which prices can be stated and compared.

As a store of value, money can be held for later use while preserving some purchasing power over time.

The three functions are distinct but mutually connected: confidence in money’s value supports its acceptance for payments and its usefulness for pricing and contracts.