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Q.

Why is money accepted as a medium of exchange?


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a

Goods and services can be bought and sold easily using money

b

It is unreliable

c

It is unstable

d

None of the above 

answer is A.

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Detailed Solution

Money is accepted as a medium of exchange as goods and services can be bought and sold easily using money. Money also helps in solving the problem of double coincidence of wants. Thus, the introduction of money has eliminated the shortcomings of the barter system. Money also creates a perfect store of value and stabilises the economy by preventing conflicts. Money can be paid in advance with a promise of goods for later. Thus, money makes economic activities independent of each other.
 
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