Question

Alberto is a carpenter. He needs a new saw in order make more cabinets to sell to his buyers. To do this, he sells a bench he has made, and uses the money to purchase a new saw. What conclusion can you make using this example? A) Alberto is using money as a store of value. B) Alberto is using money as a unit of account. C) Alberto is using money as a medium of exchange. D) Alberto is using money as a means of deferring payment.

Answer 1

The answer is: C) Alberto is using money as a medium of exchange.

The function of money as a medium of exchange refers to money's capability to be switched with other goods or services. In the scenario presented above, an exchange happen when alberto acquire his new saw. In order to acquire it, he need to conduct a transaction with the saw seller in which he agree to exchange his money with the products that owned by the saw seller.