Question

advantages of money 5 points

Answer 1

Money helps in maximising consumers’ satisfaction and producers’ profit. It helps and promotes saving.

. Money promotes specialisation which increases productivity and efficiency.

. It facilitates planning of both production and consumption.

. Money can be utilised in reviving the economy from depression.

. Money enables production to take place in advance of consumption.

Answer 2

Money occupies a unique position in a modern capitalist economy. In its absence, the whole prosperous economic life would collapse like a pack of cards.

The advantages or uses of money can be best understood by considering the system in which money is absent.

1. Money has overcome drawbacks of barter system. We have read drawbacks of barter system which make exchange process burdensome and highly inefficient. In fact, money was invented by the society to overcome these drawbacks.

The barter system suffers from four main drawbacks, each of which is overcome by a specific function of money as explained below:

(i) Money as medium of exchange solves the barter’s problem of lack of double coincidence of wants as money has separated the acts of sale and purchase. You can sell goods for money to whosoever wants it and with this money you can buy goods from whosoever wants to sell them.

Money is accepted as medium of exchange. People exchange goods and services through medium of money when they buy goods or sell goods. Thus, money becoming intermediary solves barter’s problem of double coincidence of wants.