ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Due to money’s use as a medium of exchange for buying and selling and as a value indicator for all kinds of goods and services, money can be used as a unit of account. That means money can keep track of changes in the value of items over time and multiple transactions.

Detailed explanation-2: -Money as a Medium of Exchange A medium of exchange is an asset that can be used in a transaction to exchange goods and services. Gold and other precious metals have been used as a medium of exchange before money itself, or alongside it. Not every asset can be used as a medium of exchange.

Detailed explanation-3: -Money facilitates transactions of goods and services as a medium of exchange. Producers sell their goods to wholesalers in exchange of money. Wholesalers, in turn, sell their goods to the retailers and the retailers sell these goods to the consumers in exchange for money.

Detailed explanation-4: -A medium of exchange is an instrument used to facilitate the exchange of goods and services. Money is a medium of exchange because it allows one party to compensate another without the complication of bartering.

Detailed explanation-5: -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.