Question

Identify that function of money which has effectively solved the problem of ‘double coincidence of wants’ in transactions.

• A. Standard of deferred payment
• B. Store of value
• C. Measure of value
• D. Medium of exchange

Hint:

Money as a medium of exchange removes the need for double coincidence of wants and makes trade more efficient.

Answer 1

The Correct Option is D

Step 1: Understanding the Concept:
The 'double coincidence of wants' is a major limitation of the barter system, where two individuals must possess exactly what the other needs at the same time for an exchange to occur.
This requirement makes trade highly inefficient and difficult.
Step 2: Detailed Explanation:
Money acts as an intermediary in the exchange process.
By functioning as a medium of exchange, money allows a person to sell their goods or services for money and then use that money to buy whatever they need from someone else.
This separates the act of buying from the act of selling, thereby eliminating the need for a double coincidence of wants.
Step 3: Final Answer:
The primary function of money that removes the barter system's constraint of mutual need is the medium of exchange.