If money is used as a mechanism to hold purchasing power for a period of time, it is functioning as a
store of value.
Money serves as a store of value when it retains its purchasing power over time. In other words, it acts as a means of storing and preserving wealth or purchasing power for future use. A store of value allows individuals and businesses to save money for future expenses or investments.
To understand how money functions as a store of value, it is helpful to consider inflation and the changing value of currencies. Inflation refers to the general increase in prices over time, leading to a decrease in the purchasing power of money. When money is not a reliable store of value, its purchasing power diminishes, and individuals and businesses may feel the need to spend or invest their money quickly before it loses value.
To assess the effectiveness of money as a store of value, you can consider factors such as inflation rates, interest rates on savings accounts, and the stability of the currency in comparison to other assets or investments.
Overall, money acts as a store of value when it maintains its purchasing power over time, allowing individuals and businesses to hold and preserve wealth for future use.