The most important function of money is to serve as a medium of exchange. As a medium of exchange, money removes all the difficulties of barter. There is no necessity for a double coincidence of wants in a money economy. The man with the cow, who wants to purchase a horse, need not hunt for a horse-seller who wants a cow. He can sell his cow in the market for money and then purchase a horse with the money thus obtained. The convenience is very great when the person has to sell his services or goods in an unfinished state, which no consumer in the narrow sense wants. They can be easily turned into money, the general purchasing power.

Furthermore, in a money economy it is easy to compare the relative values of commodities and services, which are dissimilar and entirely different from one another. The values are in proportion to their respective prices. Expression of values in prices enables us to add them up and have a definite idea of a person's or a community's wealth.

Money also serves as a standard of payments made after a lapse of time. Lending and borrowing, therefore, must take place in terms of a commodity that will, reasonably speaking, keep its value stable over time. Most commodities deteriorate with the passage of time. But if the money material is properly selected and managed, its value can be kept more stable than that of other articles. By serving as a standard measure of payments over time, money makes borrowing and lending much less risky. Thus, it helps in stimulating all kinds of economic activity, which depends on borrowed money or credit.