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“Money acts as a medium of exchange in transactions”. Substantiate with a suitable answer.
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Money is anything that is
generally accepted
as a
medium of exchange
in transactions.
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A medium of exchange is something that can be used to
buy and sell
goods and services without involving
barter
.
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Money acts as a medium of exchange by
facilitating trade and commerce
,
reducing transaction costs
, and
increasing efficiency and welfare
.
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Money
eliminates the need for double coincidence of wants
,by acting as a medium of exchange that is generally accepted by everyone in the economy.
- It provides a common measure of value or unit of account , as the value of different goods and services can be expressed in terms of money.
- For example, if a farmer wants to buy a bicycle from a shopkeeper, he can use money to pay for it instead of exchanging his crops or animals. This makes the transaction easier and quicker for both parties.
