What are the three functions of money?

• A. Medium of exchange, unit of account, store of value
• B. Medium of exchange, unit of account, standard of deferred payment
• C. Medium of exchange, store of value, standard of deferred payment
• D. Unit of account, store of value, legal tender

Answer: (A)

Verified step by step guidance

1. Step 1: Understand that money serves several key functions in an economy, which help facilitate trade and economic activity.
2. Step 2: Identify the first function: Money acts as a \(\textbf{medium of exchange}\), meaning it is widely accepted in exchange for goods and services, eliminating the inefficiencies of barter.
3. Step 3: Recognize the second function: Money serves as a \(\textbf{unit of account}\), providing a common measure for valuing goods and services, which helps compare prices and record debts.
4. Step 4: Note the third function: Money functions as a \(\textbf{store of value}\), allowing individuals to save purchasing power for future use without it losing value immediately.
5. Step 5: Understand that while money can also serve as a \(\textbf{standard of deferred payment}\), the three primary functions typically emphasized are medium of exchange, unit of account, and store of value.