Why are U.S. dollars considered money in the United States?

• A. Because they are the only form of currency that can be physically touched
• B. Because they are only used for international trade
• C. Because they serve as a widely accepted medium of exchange, unit of account, and store of value
• D. Because they are backed by gold reserves held by the U.S. government

Answer: (C)

Verified step by step guidance

1. Understand the fundamental functions of money in economics: money serves as a medium of exchange, a unit of account, and a store of value.
2. Recognize that for any item to be considered money, it must be widely accepted by people in the economy for buying and selling goods and services (medium of exchange).
3. Identify that U.S. dollars fulfill this role because they are accepted by individuals and businesses across the United States for transactions.
4. Note that U.S. dollars also provide a common measure to price goods and services (unit of account), making economic calculation and comparison easier.
5. Acknowledge that U.S. dollars maintain purchasing power over time, allowing people to save and use them in the future (store of value), even though they are not backed by gold reserves.