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15 November, 09:52

Which of the following is not a characteristic of money?

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  1. 15 November, 10:00
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    This question is incomplete, here are the missing answers:

    a. medium of exchange

    b. unit of account

    c. backed by a precious metal

    d. store of value

    The answer is c.

    Explanation:

    Money has three general functions (characteristics):

    - medium of exchange - Mainly created as the substitute of barter, money has the elementary use as an intermediary when exchanging goods or services.

    - unit of account - In order to compare the value of certain goods and services, it is essential to measure them. This is where money applies as unit of account.

    - store of value - Given that the money is stable (purchasing power and limited inflation), it is a general option for storing value. That means it can always be easily exchanged into goods or services, no matter the time.

    According to basic elimination, c. is the correct answer. Also, it is also known that backing money with gold or silver reserves is an old practice which is irrelevant for most currencies nowadays. Today, the government is backing up the value of its currency. Such money is called fiat money.
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