Question

Why is money called a 'medium of exchange' ?

• A. Because money can create loan
• B. Because money adds to the value of a commodity
• C. Because money acts as an intermediate in the process of exchange
• D. Because money is portable

Answer 1

Answer: (C)

Money helps to facilitate trade because people in the economy generally recognize it as valuable. Money is called medium of exchange because money is a widely accepted token that can be used for exchange of any good or service. In old days, barter system was used as medium of exchange and later it was gold.