What are the main functions of money in an economy?

The main functions of money in an economy include serving as a medium of exchange, which facilitates transactions between buyers and sellers. By providing a universally accepted currency, money eliminates the inefficiencies of barter systems. When individuals need to buy goods or services, they can exchange money for those items rather than having to find someone who not only has what they want but also wants what they have to offer in return.

This function is critical for economic activity, as it allows for greater specialization of labor, trade, and overall efficiency in the distribution of resources. For example, if a farmer has a surplus of corn, instead of searching for a specific person who wants corn in exchange for shoes, they can sell the corn for money and then use that money to purchase shoes from a merchant.

Acknowledging this fundamental role of money highlights its importance in enabling smooth and effective functioning of markets, making option B the correct answer.