Practicing Success

Target Exam

CUET

Subject

General Test

Chapter

General Knowledge

Topic

Economics

Question:

Why do we say that "Money" acts as a "Medium of exchange"?

Options:

Has a legal backing by the government

Money is the most essential thing

Acts as an intermediary in the exchange process

None of the above

Correct Answer:

Acts as an intermediary in the exchange process

Explanation:

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.