\n– The key functions of money are typically identified as:
\n 1. Medium of Exchange: Facilitates transactions by acting as an intermediate. This is crucial for avoiding the inefficiencies of barter. (Characteristic 1 is correct).
\n 2. Unit of Account: Provides a common measure of value, allowing prices of goods and services to be quoted and compared. (Characteristic 2 is correct).
\n 3. Store of Value: Allows wealth to be held over time. (Not explicitly listed, but related to other characteristics).
\n– Desirable characteristics of a good medium of exchange include:
\n – Durability: Withstands physical wear and tear.
\n – Portability: Easily carried and transported.
\n – Divisibility: Can be divided into smaller units for transactions of varying values. (Characteristic 3 is desirable and generally necessary for efficient transactions).
\n – Uniformity: All units are the same.
\n – Limited Supply: Controls inflation.
\n – Acceptability: Widely accepted by people.
\n– Characteristic 4: “Have higher value in alternative uses” means the intrinsic value of the material used as money is high (e.g., gold, silver). This is a characteristic of commodity money. However, modern money (fiat money) does not typically have high value in alternative uses; its value as money is derived from trust and government decree. Therefore, this is not a necessary characteristic for something to be recognized as money in general.
\n– Based on the standard functions and desirable characteristics, 1, 2, and 3 are generally considered essential or important attributes of money.
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