Functions of Money — Mains Strategy

Mains Strategy

For Mains, the approach to 'Functions of Money' should be analytical and integrated, rather than purely descriptive. While direct questions are less common, the concepts are indispensable for structuring answers on broader economic issues.

Focus on the 'why' and 'how' – why money performs these functions, how they interact, and how they are affected by policy or technological changes. Develop a framework to analyze the impact of events like demonetization or the introduction of CBDCs on each of the four functions.

For instance, when discussing demonetization, articulate how it disrupted the medium of exchange and store of value, and how it catalyzed the shift towards digital payments. Emphasize the role of institutions like the RBI in maintaining the stability and effectiveness of these functions through monetary policy and regulatory oversight.

Connect the functions to concepts like financial inclusion, economic growth, and stability. Use Vyyuha's analytical framework to present a balanced view, discussing both the benefits and the challenges (e.

g., inflation's impact on store of value). Structure your answers with clear introductions, well-articulated points for each function, and a forward-looking conclusion that addresses the evolving nature of money in the digital age.

Incorporate relevant current affairs and government initiatives to enrich your answers.