Two friends were talking. First friend asked the other friend, "When we say that the value of a certain wristwatch is ₹ 500, which function of money is being referred to?" Suppose you are that other friend. What would your answer be?

Store of value Medium of exchange Unit of account Transfer of value

Unit of account

When we say that the value of a certain wristwatch is ₹ 500, we mean that the wristwatch can be exchanged for 500 units of money, where a unit of money is rupee in this case. The value of all goods and services can be expressed in monetary units. This implies money acts as a convenient unit of account.