Q.Explain the primary, secondary, and contingent functions of money with suitable examples.

Money's functions are usually grouped under three heads, moving from what makes it money at all to what it additionally enables in the wider economy.

Primary functions — the functions that make something 'money' in the first place:

1. Medium of exchange — a farmer can sell rice for money and use that money to buy cloth, without needing a cloth merchant who happens to want rice in return.
2. Measure of value — the price of a bicycle and the price of a bag of rice can both be stated and compared in rupees, even though the two goods are otherwise incomparable.

Secondary functions — functions that extend money's usefulness across time and place:

3. Store of value — a household can save today's income as currency or a bank deposit and spend it several years later.

4. Standard of deferred payments — a home loan's monthly instalment is fixed in rupees, to be paid over many years.

5. Transfer of value — money (via bank transfer) lets a person send funds to a relative in another city instantly, something barter could never achieve.

Contingent (other) functions — wider roles money plays in the economy:

6. Basis of the credit system — banks accept money as deposits and lend a multiple of it, creating credit (explained later in this chapter).

7. Equitable distribution of national income — rent, wages, interest, and profit — the returns to land, labour, capital, and enterprise — are all paid and compared in money terms, which allows the value contributed by each factor of production to be assessed on a common scale.

8. Maximising satisfaction and profit — a consumer compares the money price of different goods against the marginal utility each gives, and a producer compares money cost against money revenue, to decide how much to buy or produce.

Listing only the primary functions and stopping there — a complete BIEAP Intermediate Economics answer on this topic is expected to cover all three categories, since the question is typically an essay-type question marked for breadth.