Why do we say that "Money" acts as a "Medium of exchange"?
Answer & explanation
Correct answer: option 3
Since money acts as an intermediate in the exchange process, it is called a medium of exchange. For example: It is no longer necessary for the shoe manufacturer to look for a farmer who will buy his shoes and at the same time sell him wheat. All he has to do is find a buyer for his shoes. Once he has exchanged his shoes for money, he can purchase wheat or any other commodity in the market.