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?

Unit of account

The correct answer is option 3 : Unit of account

When you say that a wristwatch is valued at ₹500, you are referring to its value in terms of money. This function of money is known as the unit of account. It provides a standard measure for comparing the value of different goods and services, allowing them to be expressed in a common monetary unit.

Store of value: This function refers to money's ability to retain purchasing power over time. While the wristwatch might have value in the future, the statement itself doesn't directly address storing value.

Medium of exchange: This function involves using money to facilitate transactions. The statement assigns a rupee value, but it doesn't describe an actual exchange taking place.

Unit of account: This is the most relevant function here. Assigning a value of ₹500 to the wristwatch establishes a common unit (rupees) to measure its worth. This allows for comparison with other goods and services priced in rupees.

Transfer of value: This term isn't a standard function of money. It's more descriptive of the outcome of an exchange using money as a medium.