Explain the medium of exchange function of money

Medium of Exchange: – It means that money acts as medium for the sale and purchase of goods and services. So, introduction of money has separated the acts of sale and purchase. In the absence of money, goods were exchanged for other goods. This required double coincidence of wants which was extremely difficult.

For example: – now a person ‘A’ can sell his goods to person ‘B’ for money and can use this money to buy the goods he wants from ‘C’ or ‘D’ or ‘E’ etc.

Importance: – Money benefits the society in many ways:

• It overcomes the difficulties of barter exchange.
• It raises the level of production.
• It allows freedom of choice.