Money is used as a medium of exchange as it provides a yardstick to measure and compare the values of goods and services.
Money is recognized all around the world. Different countries have provided different names to call money. In some countries, it is called the dollar and in some countries, it is called rupees, etc. The value of how much it is worth is written on the instrument itself. Different agencies control the flow of money in the market.
In the US the flow of dollars in the market is controlled by the U.S. Federal Reserve whereas in India the Reserve Bank controls the flow of money in the country. Before money emerged as a medium of exchange there was a system called the barter system. Under this system goods used to be exchanged for goods.
The disadvantage of the barter system was that it was not considered uniform and it was extremely difficult to use as a yardstick. Money has removed the disadvantage of the barter system as proving to be a yardstick by which we can compare the values of a wide variety of goods and services.
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