In economics, money and currency are often used interchangeably, but which of the following best describes the difference between money and currency?

• A. Money and currency are exactly the same, with no distinction between the two terms.
• B. Money refers to any item or verifiable record that fulfills the functions of medium of exchange, store of value, and unit of account, while currency specifically refers to the physical coins and banknotes in circulation.
• C. Currency includes all forms of money, including digital balances and checks, while money only refers to physical cash.
• D. Money is only used for saving, while currency is only used for spending.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the definitions of 'money' and 'currency' in economics. Money is a broader concept that includes anything that serves as a medium of exchange, a store of value, and a unit of account.
2. Step 2: Recognize that currency is a subset of money, specifically referring to the physical forms such as coins and banknotes that are used in everyday transactions.
3. Step 3: Analyze the options given by comparing them to the economic definitions. Identify which option correctly distinguishes money as a broader concept and currency as the physical form.
4. Step 4: Eliminate options that incorrectly state money and currency are the same, or that money only refers to physical cash, or that money is only for saving and currency only for spending, as these do not align with economic theory.
5. Step 5: Conclude that the best description is the one stating that money refers to any item or record fulfilling the functions of money, while currency specifically refers to physical coins and banknotes in circulation.