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 is portable
• D. Because money acts as an intermediate in the process of exchange

Answer 1

Answer: (D)

Because money acts as an intermediate in the process of exchange

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.