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31. What is money? What is the modern form of money? How has it removed the difficulties of
barter system?
SECTION E
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Answers
Answer:
What is the modern form of money?
In the modern monetary systems, there are three forms of money in actual use: (i) Metallic Money, (ii) Paper Money, and (iii) Credit Money. The first two kinds of money are in the form of currency money and the last one is credit or bank money
Explanation:
What is money?
the means of paying for something or buying something [coins or notes]
(How has it removed the difficulties of
barter system?
The five main difficulties found in barter system are as follows: 1. Double Coincidence of Wants 2. Lack of a Standard Unit of Account 3. Impossibility of Subdivision of Goods 4. Lack of Information 5. Production of Large and Very Costly Goods not Feasible.
Money was not used in the early history of man. Exchanges were few since each family was self- sufficient. Whatever exchanges there were, they took the form of barter, that is, exchange of goods for the other goods. Various difficulties were faced by the people in the barter economy.
There was no acceptable means of payment for the direct purchase of goods and services in the barter economy. In other words, in a purely barter system, there was no generally acceptable medium of exchange in the form of a particular good or asset which could be used to buy goods and services and do other types of transactions. ( I hope it's help you ❤️☺️
Money is anything which is generally acceptable as a medium of exchange. Money acts as an
intermediate in the exchange process, that is why it is called a medium of exchange Currency ipaper.
notes and coins), debit cards, credit cards and demand deposits withdraww able by cheques are modern
form of money.
Money has removed the problem of double coincidence of wants involved in the Barter system. Under the barter system, the transactions between two persons were executed through the mutual exchange of goods. For example, person A has pot rice and wants a blanket, while person B has blanket and wants rice. Both of them have things which the other one wants So, the transaction here can take place easily. The situation becomes difficult when one of them wants something which the other one does not have, for example, persun B has got blanket hut he wants milk instead of rice. Now he will have to search for a third person who has milk and wants rice. This is highly difficult. Money has made this situation easier by breaking a single exchange transaction for specific goods into two transitions of buying and selling by involving a medium of genera accoptability, ie, money. For example, person A may buy blanket from person B by giving him money, while person B may milk from someone else who may or may not want rice by paying him that money any time. So, the transaction become easier for everyone and one does not have to care for mutual coincidence of wants of goods.