Question

"In a country, routine economic operations rely on a stable medium, to facilitate transactions for maintaining smooth economic activities." Discuss briefly the indicated function of money.

Hint:

The role of money as a medium of exchange simplifies trade and supports economic growth by providing a standard for value and facilitating smooth transactions.

Answer 1

The indicated function of money in the statement is its role as a medium of exchange. In economic operations, money serves as a universally accepted intermediary in transactions. Instead of engaging in barter, where goods and services are exchanged directly, money allows for a more efficient transaction process. It facilitates buying and selling activities by providing a standard unit of value. A stable medium of exchange ensures that goods and services are traded at agreed-upon values, without the need for direct negotiation of barter terms. This stability promotes smooth economic activities and enhances market efficiency.
Money also simplifies transactions, fosters specialization, encourages savings, and supports investment by maintaining stable value over time.