Final answer:
The correct answer is option c. A medium of exchange is anything that is generally accepted in exchange for goods and services. It facilitates transactions by acting as an intermediary and serves other functions like being a unit of account and store of value.
Step-by-step explanation:
A medium of exchange is a fundamental concept in economics and a key function of money. When we ask what a medium of exchange is, we are referring to anything that is generally accepted in exchange for goods and services. This acceptance eliminates the need for a barter system, where a direct exchange of goods and services must take place, which often requires the cumbersome double coincidence of wants.
The concept of a medium of exchange exists to circumvent the limitations of barter. It serves not just as an intermediary in transactions, but also as a unit of account, providing a measure for valuing goods and services in a consistent manner. Moreover, it acts as a store of value, allowing people to maintain the value of their earned wealth over time. This is crucial because if money did not hold value, it would need to be spent immediately, eroding its utility as a means for transacting.
Historically, various items have served as money, demonstrating the characteristics necessary for something to function effectively as a medium of exchange. From cowry shells to precious metals and now to fiat currency, each evolution has built upon the notion of widely accepted value within a society. For something to serve this function, it must be durable, portable, divisible, and have consistent value.
Therefore, answering the original question, c. anything that is generally accepted in exchange for goods and services, is the correct option that defines a medium of exchange.