is the most liquid form of capital. In other words, capital in the form of money can be put to any use. It is on account of this liquidity of money that capital can be transferred from the less productive to the more productive uses. .Other Functions i) Money helps to maintain Repayment Capacity: Money possesses the quality of general acceptability.
To maintain its repayment capacity, every firm has to keep assets in the form of liquid cash. The firm ensures its repayment capacity with money. Likewise, banks, insurance companies and even governments have to keep some liquid money (i.e., cash)to maintain their repayment capacity. ii) Money represents Generalized Purchasing Power: Purchasing power kept in terms of money can be put to any use.
It is not necessary that money should be used only for the purpose for which it has been served. iii) Money gives liquidity to Capital: Money is the most liquid form of capital. It can be put to any use. - - Monetary Economics