Savings done in terms of commodities were not permanent. But, with the invention of money, this difficulty has now disappeared and savings are now done in terms of money. Money also serves as an excellent store of wealth, as it can be easily converted into other marketable assets, such as, land, machinery, plant etc. ii) Money as a Standard of Deferred Payments: Borrowing and lending were difficult problems under the barter system.
In the absence of money, the - - Monetary Economics borrowed amount could be returned only in terms of goods and services. But the modern money-economy has greatly facilitated the borrowing and lending processes in terms of money. In other words, money now acts as the standard of deferred payments. iii) Money as a Means of Transferring Purchasing Power: The field of exchange also went on extending with growing economic development.
The exchange of goods is now extended to distant lands. It is therefore, felt necessary to transfer purchasing power from one place to another. .Contingent Functions i) Basis of the Credit System: Money is the basis of the Credit System. Business transactions are either in cash or on credit.
For example, a depositor can make use of cheques only when there are sufficient funds in his account. The commercial banks create credit on the basis of adequate cash reserves. But, money is at the back of all credit. ii) Money facilitates distribution of National Income: The task of distribution of national income was exceedingly complex under the barter system.
But the invention of money has now facilitated the distribution of income as rent, wage, interest and profit. iii) Money helps to Equalize Marginal Utilities and Marginal Productivities: Consumer can obtain maximum utility only if he incurs expenditure on various commodities in such a manner as to equalize marginal utilities accruing from them. Now in equalizing these marginal utilities, money plays an important role, because the prices of all commodities are expressed in money. Money also helps to equalize marginal productivities of various factors of production.
iv) Money Increases Productivity of Capital: Money