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Difficulty: MediumMeaning, Functions, and Characteristics of Money

The function of money as a unit of account is classified as a primary function because it provides a common denominator for expressing and comparing the economic values of different goods and services.

Answer: Answer

Answer

True
The statement is accurate because serving as a unit of account is a primary function of money that allows market participants to express, compare, and record values using a uniform numerical standard.

Step-by-Step Solution

1
Identify the specific function of money referenced in the statement
The statement focuses on the 'unit of account' (measure of value) function of money.
Determining which function is being described is necessary before evaluating its classification.
2
Distinguish between primary and secondary functions of money
Money has two primary functions: acting as a medium of exchange and serving as a unit of account. Secondary functions include store of value, standard of deferred payment, and transfer of value.
Primary functions are the indispensable core duties money fulfills in any exchange economy.
3
Evaluate the correctness of the statement
The statement correctly identifies unit of account as a primary function and accurately describes its operational role.
Without a unit of account, relative prices would have to be expressed in terms of every other commodity, replicating the exchange friction of barter trade.

Key Concept

Primary Functions of Money
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Topics

Meaning, Functions, and Characteristics of Money

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