Question

The function of money in an economy is to serve as 1) a unit of account; 2) a store of value; 3) a medium of exchange.

A) 1 and 2
B) 2 and 3
C) 1 and 3
D) 1, 2, and 3

Answer 1

Money acts as a medium of exchange, a store of value, and a unit of account in an economy, hence option D) 1, 2, and 3 is correct.

Step-by-step explanation:

The function of money in an economy is multifaceted. It primarily serves as a medium of exchange, facilitating the buying and selling of goods and services without the complexities of a barter system. Money also functions as a store of value, allowing individuals to save and preserve their wealth over time. Lastly, it acts as a unit of account, providing a standard measurement for the valuation of goods and services, which simplifies complex trade and exchange situations. Hence, the correct answer to the student's question is D) 1, 2, and 3, signifying that money indeed serves all three roles in an economy.