Read the passage carefully and answer the question based on the passage:

Role of Money

In modern economics, money plays a very crucial role as medium of exchange, unit of account, store of value and standard of deffered payment. The banking system, a cornerstone of financial markets, facilitates the creation and circulation of money.

Commercial banks accept deposits from the public and provide loans. A fraction of the deposits are kept by the commercial banks as reserves and the rest is lent out. This amplifies the money supply in the economy through the 'Multiplier Effect'. The RBI as central Bank regulates the money supply through monetary policy tools. These tools influence the credit availability and overall liquidity in the system, impacting inflation, growth and employment.

Which function of money helps in comparing the value of different goods and services?

unit of account.

The correct answer is Option (2) → unit of account.

• Medium of exchange: This means money simplifies transactions by eliminating the need for barter. Instead of trading goods directly, people use money to buy what they need.

• Unit of account: This function allows us to measure and compare the value of different goods and services in a standardized way. For example, knowing that a shirt costs $20 and a pair of shoes costs $50 helps us understand that the shoes are 2.5 times more expensive than the shirt. Without money as a unit of account, comparing values would be very difficult.

• Store of value: This means money can be held and exchanged for goods and services at a later time without significant loss of purchasing power. It allows people to save their wealth.

• Standard of deferred payment: This function enables people to make and receive payments in the future, facilitating credit transactions and loans.

Therefore, among the options provided, unit of account directly addresses the ability to compare the value of different goods and services.