What Are The Contingent Functions of Money ??
it is there in the study material part of meritnation
Contingent Functions of Money
The following are the various contingent functions that money performs.
a. Facilitates Credit- Money facilitates the functioning of credit instruments such as cheques, promissory notes, bills of exchange, etc. Such credit instruments facilitate transfer of value from one person to another.
b. Facilitates Distribution of Income- Factor payments can be made easily in form of monetary remunerations such as wages, rent, interest and profit.
c. Maximises Consumers’ and Producers’ Satisfaction- Since all goods and services are valued in terms of money, therefore, it is possible for a consumer to maximise his/her satisfaction by equalising marginal utilities of various goods consumed. Similarly, all the factors of production are valued in monetary terms. Consequently, it becomes possible for a producer to maximise production by equalising marginal productivities of different factors of production.
d. Liquidity-Money is the most liquid form of all the assets and wealth. Gold, silver, land, cheques, etc. are not as liquid as money. If need arises, then these assets have to be converted into money, but on the other hand, money need not to be converted into any other form as it is readily acceptable. Apart from being liquid, money also provides guarantee of liquidity/solvency to other forms of wealth and assets. This implies that money can be converted into any type of asset and on the other hand, any type of asset can be converted into money.
As money is generally acceptable by all it can be easily transferable. Contingent functions of money are at least four in number. They are
1. The distribution of social income.
2. The equalization of expenditure.
3. To provide a base for the credit system.
4. To Provide capital for the organization.