Match each function or characteristic of money listed on the left with its correct economic description on the right.
- Medium of ExchangeOvercomes the barter system's problem of double coincidence of wants by facilitating smooth trade transactions.
- Unit of AccountProvides a common denominator for measuring and comparing the relative monetary value of goods and services.
- Standard of Deferred PaymentFacilitates credit transactions by enabling debts to be incurred today and settled in the future.
- DivisibilityEnsures currency can be divided into smaller units without losing overall value, allowing micro-transactions.
Answer
Medium of Exchange matches with overcoming the double coincidence of wants; Unit of Account matches with providing a common denominator for value measurement; Standard of Deferred Payment matches with facilitating credit transactions and future debt settlement; Divisibility matches with enabling division into smaller units for micro-transactions.
Each item correctly pairs a core economic property or function with its precise definition. Medium of Exchange solves the double coincidence of wants issue inherent in barter trade. Unit of Account offers a uniform metric for pricing commodities. Standard of Deferred Payment permits future financial settlements. Divisibility ensures money can be divided into smaller denominations.
Step-by-Step Solution
Key Concept
Functions and Characteristics of Money