Money is a medium of exchange which is generally accepted, it is widely accepted in a society in exchange for goods and services. Money can also serve as a store of value and a unit of account.  Money can be lent and borrowed. The cost of money is the rate of interest which is charged on the borrowing and lending.  Any form of money that is recognized by the law is known as legal tender.

Money should have certain characteristics which should be looked upon and accordingly be followed. The characteristics are as follows:-

Acceptability: Money should be acceptable; it should be recognized through out and accepted as medium of exchange where ever it might be used.

Portability: Money should be easy to carry, it should be portable so that there might be convenient for an individual to keep it safely.

Divisibility: It should be able to split in small amounts, it should be divisible.

Durability: The wear and tear of money on usage should be very low; as it might travel from hand to hand and pocket to pocket it should not lose its original condition and tear off with use.

Scarcity: Money should not be in abundant amount and should be inaccessible without a tradeoff with goods and services. It should also have a stable purchasing power.

Uniformity: The shape, size, color and weight of the money should be standardized and uniform through out. And it should be very difficult to forge or duplicate.

Money is used for many functions, they are as follows:-

Medium of exchange: This is the defining function of money; it is the most liquid asset. It used to purchase goods and services.

Unit of account; Money is used as a unit of account and a measure of value. By assigning prices on every unit we can measure the value and compare. Unit of account means that it is a valuable tool for us through which we record transactions.

Store of value: Money is the most liquid form of asset so it can be stored as surplus wealth. The whole economic base is dependent on store of value of money.

Standard of deferred payments: This function is important as it is enhancing trade, demand, living standard etc. People buy goods and services on credit. Plastic money such as credit cards and other credit facilities are used to purchase goods and services on credit.

Transfer of value: Financial capital and assets can be transferred from one place to another. Also non money financial assets for example: property, stocks and bonds can be transferred.

There are two types of money, narrow money and broad money. Narrow money concentrates on medium of exchange which may include notes and coins and current accounts, these are the types called money narrowly defined. Where as the money broadly defined which includes medium of exchange and store of value both the functions of money, is known as broad money. These may include notes, coins, current accounts, time deposits and deposits in banks.