Final answer:
Money used as payment for goods and services functions as a medium of exchange. It also serves as a unit of account, store of value, and standard of deferred payment, which facilitates transactions and reduces transaction costs.
Step-by-step explanation:
When money is used as payment for goods and services, it is being used as a medium of exchange. This is one of the primary functions that money serves in an economy alongside being a unit of account, a store of value, and a standard of deferred payment. Money enables easier transactions compared to bartering because it eliminates the need for a double coincidence of wants.
The existence of commodity money and fiat money speaks to the variety of forms money can take. While commodity money has an intrinsic value aside from its use as money, fiat money is valued by government decree and does not have intrinsic value. The advantages of using money instead of bartering include reduced transaction costs and increased speed and efficiency of transactions. Currency and credit/debit cards further simplify the process of exchange and mitigate some disadvantages of bartering.