Final answer:
Money is best defined as a generally accepted medium of exchange (A). It functions as a medium of exchange, a unit of account, a store of value, and a standard of deferred payment. Types of money include commodity and fiat money, and money supply can be measured using M1 and M2.
Step-by-step explanation:
Money is commonly defined as A) A generally accepted medium of exchange. This definition aligns with the universal generalization that money is what people in a society use regularly when purchasing or selling goods and services. Without money, people would have to engage in bartering, which necessitates a double coincidence of wants. As a medium, money serves several critical functions in an economy: it acts as a medium of exchange, a unit of account, a store of value, and a standard of deferred payment.
There are different types of money, including commodity money, such as gold, which has value in its own right, and fiat money, which has no intrinsic value but is established as legal tender by a government. Historically, some currency systems were based on commodity-backed currencies, like those backed by gold or silver, where the money supply was directly tied to the value of these metals.
When measuring money, economists refer to M1, which includes currency and checking accounts, and M2, which comprises all of M1 plus savings accounts, certificates of deposit, and money market funds.