Q:

What are some of the different uses of money?

A:

Quick Answer

The primary use of money is for the purchase of goods or services. Money allows for a one-sided purchase transaction, which is typically less complex than a barter system where one person exchanges an item of value for a similarly valued item owned by the other party.

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Full Answer

Money also serves as a determinate of value in a society. When a company charges $10 for a product, for instance, demand in the marketplace indicates whether consumers believe $10 is a fair value. The amount of money a person or company holds is also used as a measure of worth. When a person applies for a loan, for instance, his income and financial assets are a major factor in the banks' determination on issuing the loan.

Money is also the most liquid asset in most cultures. In the United States, for instance, it is typically easier for a person to purchase an item for sale with cash than with any other asset.

Money is also a safe way to build and store wealth. When people hold money in the bank, it often generates interest income over time. Additionally, holding money as opposed to buying investments or assets simplifies the process of going from a purchase decision to a point of transaction.

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