What function of money allows it to serve as a medium of exchange?

What function of money allows it to serve as a medium of exchange?

• A. Store of value
• B. Unit of account
• C. Standard of deferred payment
• D. Medium of exchange

Answer: (D)

The function that enables money to serve as a medium of exchange is fundamentally its ability to facilitate transactions between parties. When we refer to money as a medium of exchange, we mean that it is an accepted intermediary in the buying and selling of goods and services. This role is critical in an economy because it eliminates the complications and inefficiencies of barter systems, where goods must be exchanged directly for other goods. As a medium of exchange, money allows individuals to trade without needing to find a mutual desire for the goods being exchanged, making transactions easier and more efficient. It streamlines the process of commerce, enabling buyers and sellers to engage in transactions freely and frequently without the necessity of bartering. The other functions of money, such as being a store of value, a unit of account, and a standard of deferred payment, play supportive roles in the economy. While they are important for understanding the overall utility of money, they do not directly explain its primary function in facilitating trade and commerce as a medium of exchange does.

The function that enables money to serve as a medium of exchange is fundamentally its ability to facilitate transactions between parties. When we refer to money as a medium of exchange, we mean that it is an accepted intermediary in the buying and selling of goods and services. This role is critical in an economy because it eliminates the complications and inefficiencies of barter systems, where goods must be exchanged directly for other goods.

As a medium of exchange, money allows individuals to trade without needing to find a mutual desire for the goods being exchanged, making transactions easier and more efficient. It streamlines the process of commerce, enabling buyers and sellers to engage in transactions freely and frequently without the necessity of bartering.

The other functions of money, such as being a store of value, a unit of account, and a standard of deferred payment, play supportive roles in the economy. While they are important for understanding the overall utility of money, they do not directly explain its primary function in facilitating trade and commerce as a medium of exchange does.