Money must perform certain functions. The functions
are;
1) Medium of exchange - must
be to act as an intermediary in interactions between one another.
2) Measure of Value - the commodity used as money must
capable of measuring the value of goods or service.
3) Store of value - the capability of money to store
for a long time without deteriorating its value.
4) Standard of deferred payment - money must remain fixed and act as a yardstick (criterion) in all the
future payments.
Good money must possess certain qualities
(characteristics). They are;
1) Acceptability - Money has acceptability, because it is made legal tender by law.
The people must accept money with confidence that its value will remain and can
be used for exchanging goods and services.
2) Durability - the ability to stay in good condition for a
long time even if used many times.
3) Divisibility - the quality of money to get its worth
divided without any loss of value.
4) Portability - the ability to carry from one place
to other easily ( that it should not be heavy or difficult to carry)
5) Uniformity - the quality of money, that
it must be alike for all units of same value.
6) Limited in supply (scarce) - so as to preserve the value of it, in other
words, it should not be available in plenty so as to be a free good.
7) Stability of value - money should be kept stable in its value so as to make
future payments.
8). Difficult
to counterfeit - the material used for
money should be made in such a way that it should be very difficult to counterfeit.
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