What does money serve as in financial transactions?

Money primarily serves as a medium of exchange in financial transactions. This function facilitates the buying and selling of goods and services by providing a universally accepted form of payment. When money is used as a medium of exchange, it eliminates the inefficiencies associated with barter systems, where individuals would have to match their needs and wants precisely to trade goods. This makes transactions smoother and more efficient, promoting trade and commerce.

While other functions of money exist, such as serving as a measure of value or a store of value, the essential role in facilitating transactions is its use as a medium of exchange. This allows money to act as a common denominator, making it easier for sellers and buyers to agree on prices and conduct transactions, fostering economic growth and stability.