1. The principal advantage money has over barter is its function as:
A. a store of value.
B. a medium of exchange.
C. unit of account.
D. debt.

Question

1.    The principal advantage money has over barter is its function as:
A.    a store of value.
B.    a medium of exchange.
C.    unit of account.
D.    debt.

BlackTom AI · Accepted Answer

Question restatement: The principal advantage money has over barter is its function as:
A. a store of value.
B. a medium of exchange.
C. unit of account.
D. debt.

Option A: 'a store of value.' While money can serve as a store of value, this is not the primary reason money replaces barter. Barter systems can be unstable over time due to inflation, perishability, or uncertainty about future prices, so the ability to hold value is helpful but not the defining advantage that enables widespread trade.

Option B: 'a medium of exchange.' This is the key benefit that makes money superior to barter in most economic contexts. A medium of exchange facilitates transactions by reducing the need for a double coincidence of wants, speeding up trades, and enabling more complex and frequent exchanges. This is the core reason money supplanted barter in modern economies.

Option C: 'unit of account.' Money does provide a common measure for valuing goods and services, which helps prices and debts be expressed consistently. However, the fact that money can function as a unit of account is closely related to its role as a medium of exchange; it is not the single most fundamental advantage over barter, which is the ease of trading itself.

Option D: 'debt.' Money is not inherently debt, and the ability to settle transactions does not rely on money being debt. Treating money as debt would complicate a barter system’s simplicity and would not explain why money is preferred for trading goods and services. This option mischaracterizes the nature of money and its practical use in exchange.

Summary of reasoning: While store of value and unit of account are important features of money, the decisive factor that makes money superior to barter in enabling widespread and efficient trade is its role as a medium of exchange. The idea of money as debt does not align with its function in standard monetary systems.

ECNM1115.32542.202530 Practice Quiz 14 Money Banking and Financial Institutions

1. The principal advantage money has over barter is its function as: A. a store of value. B. a medium of exchange. C. unit of account. D. debt.

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