Final answer:
Money serves as a medium of exchange, a store of value, a unit of account, and a standard of deferred payment. These functions facilitate buying, selling, saving, and credit transactions in an economy.
Step-by-step explanation:
The concept of money is critical to the functioning of an economy, and economists identify three primary functions of money: as a medium of exchange, a store of value, and a unit of account.
Money's primary function is to facilitate transactions as a medium of exchange. It enables the buying and selling of goods without the complexity of a barter system, allowing for an efficient exchange of value.
Money can preserve value over time, providing stability and assurance that it can be used for future transactions. This aspect is crucial for saving and deferring purchases until desired.
As a unit of account, money provides a consistent measure to determine the value of goods and services, making it easier to compare and trade.
Additionally, money also acts as a standard of deferred payment, which underpins credit systems, allowing for the purchase of goods and services with the promise of future payment.