In order for something to function well as a medium of exchange, it must be
A) issued by a central government.
B) readily and widely accepted in trade.
C) backed by a valuable commodity.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

Option A is not necessarily true, as cryptocurrencies like Bitcoin are not issued by any central government but still function as a medium of exchange. Option C may have been true historically when currencies were backed by gold or other valuable commodities, but today most currencies are fiat money not backed by a commodity. Option B, however, is crucial for a medium of exchange to function well. It must be readily and widely accepted in trade, meaning people are willing to use it to buy goods and services and merchants are willing to accept it as payment. Without this widespread acceptance, a medium of exchange would not be very useful.

In Order for Something to Function Well as a Medium