Identify the function of money from points given below. Choose the co…

The correct answer is option (3) : Medium of exchange

Money serves various functions in an economy. These functions are often categorized into the following :

1. Medium of Exchange: Money facilitates the buying and selling of goods and services. It acts as an intermediary in transactions, making trade more efficient. In the absence of money, a barter system would require a double coincidence of wants, which can be cumbersome.

2. Unit of Account: Money provides a common measure of value for goods and services. It allows individuals and businesses to express prices and costs in a standardized unit, making it easier to compare and record financial transactions.

3. Store of Value: Money can be saved and used in the future. It retains its value over time, allowing people to save their wealth and use it when needed. This function is important for long-term financial planning.

4. Standard of Deferred Payment: Money allows for agreements to be made to pay for goods or services at a later
date. It serves as a standard for measuring future obligations and debts.

5. Standard of Value: Money provides a stable measure of value for economic activities. It helps in comparing the
value of different goods and services and is essential for economic decision-making.