Which of the following best illustrates the medium of exchange function of money?

• A. A person uses cash to buy groceries at a supermarket.
• B. A person saves money in a bank account for future use.
• C. A person compares the prices of two products using their monetary values.
• D. A person invests money in stocks to earn a return.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of the 'medium of exchange' function of money. This function means money is used as an intermediary instrument to facilitate the sale, purchase, or trade of goods between parties.
2. Step 2: Identify the key characteristic of a medium of exchange: it must be widely accepted as a method of payment in transactions for goods and services.
3. Step 3: Analyze each option to see if it involves money being used directly to buy or sell goods or services.
4. Step 4: Recognize that 'A person uses cash to buy groceries at a supermarket' directly shows money being exchanged for goods, fulfilling the medium of exchange role.
5. Step 5: Note that other options involve money as a store of value, a unit of account, or an investment, which are different functions of money, not the medium of exchange.