Justify the following statements with valid arguments : (a) Money serves as a 'store of value' in an economy. (b) The Central Bank acts as 'Government's Bank' in an economy.

Question

Accepted Answer

(a) **Store of Value:** Money functions as a store of value because it allows people to transfer purchasing power from the present to the future. Unlike perishable goods in a barter system, money is durable, easily storable, and portable. It provides security for unforeseen future obligations and can be exchanged for goods and services at any time. While other assets can store wealth, money is the most liquid and convenient form.

(b) **Government's Bank:** The Central Bank acts as Government's Bank by managing the government's banking operations. It receives payments on behalf of the government, makes payments on behalf of the government, manages the government's accounts, and provides short-term loans (ways and means advances) to the government when needed.