Examkin

Question

Difficulty: EasyFunctions and Characteristics of Money

A student pays ₦15,000 cash to purchase a textbook, and the seller accepts the currency immediately in exchange for the book. Which primary function of money does this transaction illustrate?

  1. Medium of exchangeAnswer
  2. B
    Store of value
  3. C
    Standard of deferred payment
  4. D
    Unit of account

Answer

Medium of exchange
The option stating 'Medium of exchange' is correct because money functions as a medium of exchange whenever it acts as an intermediary token during the buying and selling of goods and services, eliminating the inefficiencies of barter.

Step-by-Step Solution

1
Analyze the action taking place in the scenario.
A buyer hands over currency to receive a physical item in a direct trade.
Identifying the nature of the economic exchange helps determine the function of money involved.
2
Map the transaction to the corresponding function of money.
The money facilitates the trade of goods, serving as a medium of exchange.
When money is used to facilitate immediate buying and selling, it acts as a medium of exchange.

Key Concept

Functions of Money - Medium of Exchange
Estimated Time:45s
Rate this question

Topics

Functions and Characteristics of Money

More questions from this topic