What is the primary function of money?

The primary function of money is to serve as a medium of exchange. This means that money facilitates transactions between buyers and sellers. By using money, individuals can trade goods and services without the complications of barter, which requires a double coincidence of wants—where each party must have what the other wants. Money streamlines this process by providing a universally accepted currency that can be used to assign value and settle transactions.

This function is essential for an efficient economy because it allows for a higher degree of specialization and division of labor. For example, instead of spending time finding someone who wants to trade directly, individuals can sell their goods or services for money, which they can then use to purchase what they need from others. This opens up possibilities for a more dynamic and robust economic environment.

In contrast to the other options, while money can have roles related to communication and representation of value, its primary role is rooted in facilitating straightforward exchanges within the economy. Additionally, viewing money as merely a government bond or a representation of physical commodities does not capture its versatile nature in day-to-day transactions and economic activity.