CBSE Class 12-commerce Answered

Medium of exchange and measure of value are the two primary functions of money.

1. Medium of exchange: The primary function of money is to act as a medium of exchange between two parties involved in a transaction. It avoids the practical problems of wastage of time and resources involved with the barter system of exchange and it improves the efficiency of the transaction. It promotes allocation efficiency in the trade and production of goods and services.
2. Measure of value: Money serves as a common measure of value or a standard of value. Value of all goods and services are expressed in terms of money.