HISET Social Studies Practice

Which of the following is a characteristic of money?

1. It must be tangible

2. It is a unit of account

3. It cannot lose value

4. It is always in paper form

The correct answer is: It is a unit of account

A characteristic of money is that it serves as a unit of account, which means it provides a standard numerical unit of measurement that allows people to compare the value of goods and services. This function enables individuals and businesses to track expenses, value transactions, and manage economic exchanges effectively. By establishing a consistent medium for valuing items, money facilitates trade and economic calculation. The other options do not define essential characteristics of money. While money can be tangible, it is not a strict requirement, as digital currencies are increasingly becoming prevalent. The idea that money cannot lose value is unrealistic in practice since factors such as inflation can affect purchasing power. Lastly, money is not limited to being in paper form; it can also exist as coins, digital currencies, and various other forms. This flexibility enhances its effectiveness in the economy.