The correct answer is Used for regulating consumption.
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Money is often characterized in terms that the three functions or services the it provides.Money serves as a medium that exchange, as a keep of value, and as a unit the account.The medium of exchange: Money's most important function is together a medium of exchange to facilitate transactions.Without money, all transactions would need to be conducted by barter, which involves direct exchange of one good or organization for another.Store that value: In bespeak to be a medium that exchange, money must hold that is value end time that is, it should be a store of value. If money could not be stored because that some duration of time and still remain valuable in exchange. it would no solve the double coincidence of wants problem and therefore would not it is in adopted as a medium of exchange.Unit that account: Money additionally functions together a unit the account, giving a common measure of the worth of goods and also services being exchanged.Knowing the worth or price that a good, in terms the money, allows both the supplier and also the purchaser of the good to make decisions about exactly how much the the good to supply and also how much of the good come purchase.The need for money is influenced by several factors, including the level that income, interest rates, and inflation as well as uncertainty around the future.Key Points
Additional InformationThe means in which this factors affect money demand is usually explained in terms of the 3 motives for demanding money the transactions, the precautionary, and also the dangerous motives.Transactions motive: The transaction's motive for demanding money arises indigenous the truth that most transactions involve one exchange of money. Since it is crucial to have actually money available for transactions, the money will be demanded.The total number of transactions made in one economy tends to boost over time as earnings rises.Precautionary motive: People often need money as a precaution against an uncertain future. Unexpected expenses, such as medical or car fix bills, regularly require immediate payment.The need to have actually money easily accessible in together situations is referred to as the precautionary motive because that demanding money.
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Speculative motive:Money, like various other stores that value, is one asset. The need for one asset depends on both the rate that return and its opportunity cost.Typically, money holdings provide no rate of return and also often depreciate in value because of inflation.The opportunity cost of stop money is the interest rate that have the right to be deserve by loan or investing one's money holdings.