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Question

Difficulty: EasyMeaning, Functions, and Characteristics of Money

For a medium of exchange to function effectively in an economy, it must be recognized, approved, and willingly taken by all members of the public as settlement for debts and purchases. Which essential characteristic of money does this statement describe?

  1. General acceptabilityAnswer
  2. B
    Divisibility
  3. C
    Portability
  4. D
    Durability

Answer

General acceptability
General acceptability is the prime quality of money. An item functions as money primarily because people have confidence that others will accept it in exchange for goods, services, or debt settlements.

Step-by-Step Solution

1
Identify the key defining feature in the prompt
The prompt emphasizes that everyone in the economy recognizes, approves, and willingly accepts the item as payment.
Understanding the central attribute helps differentiate between physical traits and social/legal attributes of money.
2
Match the attribute to the correct characteristic
The willingness of all individuals to accept an item as payment defines 'General Acceptability'.
Without general acceptability, an item cannot serve as a medium of exchange regardless of its physical traits.

Key Concept

Characteristics of Money - General Acceptability
Estimated Time:45s
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Topics

Meaning, Functions, and Characteristics of Money

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