Explain the ‘ Unit of account’ function of money.
Another important function of money is that it serves as a common measure of value or a unit of account.
Under barter economy there was no common measure of value in which the values of different goods could be measured and compared with each other. Money has also solved this difficulty.
As Geoffrey Crowther puts it, “Money acts as a standard measure of value to which all other things can be compared.” Money measures the value of economic goods.
Money works as a common denominator into which the values of all goods and services are expressed.
When we express the values of a commodity in terms of money, it is called price and by knowing prices of the various commodities, it is easy to calculate exchange ratios between them.
