ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Money serves as a medium of exchange, as a store of value, and as a unit of account. Medium of exchange. Money’s most important function is as a medium of exchange to facilitate transactions.

Detailed explanation-2: -Money is anything that serves as a medium of exchange. Other functions of money are to serve as a unit of account and as a store of value. Money may or may not have intrinsic value.

Detailed explanation-3: -A medium of exchange is an intermediary instrument or system used to facilitate the purchase and sale of goods and services between parties. For a system to function as a medium of exchange, it must represent a standard of value. Further, all parties to the transaction must accept that standard.

Detailed explanation-4: -Money is called medium of exchange because money is a widely accepted token that can be used for exchange of any good or service. In old days, barter system was used as medium of exchange and later it was gold.

Detailed explanation-5: -To summarize, money has taken many forms through the ages, but money consistently has three functions: store of value, unit of account, and medium of exchange. Modern economies use fiat money-money that is neither a commodity nor represented or “backed” by a commodity.