Money is able to function more as a medium of exchange when

Step 1: Analyze the question The question asks about the condition under which money works better as a medium of exchange, meaning something people accept in payment for goods and services.

Step 2: Explain the concept Money became necessary because of the problems of barter, especially the need for a "double coincidence of wants." When people specialize in producing particular goods or services, they produce far more than they personally need. They must trade the surplus to get everything else they want. This trade needs a convenient, widely accepted medium, and that is money.

So the more people specialize (division of labour), the more exchange takes place, and the more important money becomes as a medium of exchange.

Step 3: Check each option

• A. A fall in production: Less output means fewer goods to trade, so there is less need for exchange. Wrong.
• B. More people engage in subsistence production: Subsistence producers consume what they produce and trade very little, so money is used less. Wrong.
• C. Individuals and nations are self-sufficient: Self-sufficiency removes the need for trade, so money is not needed for exchange. Wrong.
• D. There is specialization of labour: People depend on one another for goods and services, so exchange is widespread and money is used constantly. Correct.

Step 4: Answer

Tip: Link the keywords: specialization → surplus → exchange → money. If an option describes people being self-sufficient or producing only for themselves (subsistence), it works against the use of money, so you can eliminate it quickly.