In an unstable economy, the functions of money are crucial for maintaining economic activity and stability. The main functions of money in such an economy are: 1. _Medium of Exchange_: Money facilitates trade and exchange, enabling individuals and businesses to buy and sell goods and services. 2. _Store of Value_: Money serves as a store of value, allowing individuals and businesses to save and store wealth during uncertain times. 3. _Unit of Account_: Money provides a standard unit of account, enabling prices to be quoted and transactions to be recorded. 4. _Standard of Deferred Payment_: Money enables credit and debt, allowing for delayed payments and financial planning. 5. _Liquidity_: Money provides liquidity, allowing individuals and businesses to meet financial obligations and take advantage of investment opportunities. 6. _Hedge against Uncertainty_: Money acts as a hedge against uncertainty, providing a safe-haven asset during times of economic instability. 7. _Facilitates International Trade_: Money enables international trade, allowing countries to exchange goods and services. In an unstable economy, money plays a vital role in: 1. _Reducing transaction costs_ 2. _Facilitating economic activity_ 3. _Maintaining price stability_ 4. _Providing a sense of security_ 5. _Enabling financial planning_ 6. _Supporting economic growth_ However, in extreme cases of instability, such as hyperinflation or currency crises, the functions of money can be severely impaired, leading to alternative forms of exchange, such as bartering or foreign currencies, emerging.
