CMA Foundation · Fundamentals of Business Economics and Management · Money and Banking
A textile firm in Surat quotes the prices of cloth, wages of workers and rent of its godown all in rupees, which allows the owner to compare the relative worth of these very different items. Which function of money does this primarily show?
This shows money as a measure of value, also called unit of account. Because cloth, wages and rent are all expressed in rupees, the owner can compare and record their relative worth using one common unit, which is not the same as storing wealth or exchanging goods.
- AStore of value
- BMeasure of value (unit of account)Correct
- CMedium of exchange
- DTransfer of value
Explanation
Expressing prices of unlike items in a common unit, the rupee, lets their values be compared and recorded. This is the measure of value or unit of account function. Store of value is about preserving wealth over time, which is not described here.
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