Among the following, which are the functions of money?
(A) Medium of exchange.
(B) Unit of account.
(C) Bartering
(D) Store of value
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (A), (B) and (D) only
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(A) Medium of exchange: Money simplifies transactions, allowing people to buy and sell goods and services without the need for a "double coincidence of wants," which is a major drawback of the barter system.
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(B) Unit of account: Money provides a common measure for the value of goods and services, making it easy to compare prices and keep financial records.
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(D) Store of value: Money can be saved and held for future use, allowing people to defer consumption.
(C) Bartering is not a function of money; rather, it is a system of exchange that existed before money, where goods and services were traded directly for other goods and services. Money was invented to overcome the inefficiencies of bartering.