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Money and Credit
Barter System: The barter system was used before the advent of money. People used to exchange one thing for another in this system.
Double Coincidence of wants: The double coincidence of wants is the major drawback of the barter system. It can be very difficult to find a person who can fulfill this condition. Suppose you want to barter your MP3 player with a game console, then you need to find a person who wants to barter his game console for an MP3 player.
Money
Money is a means by which we can get something in exchange. Initially, coins came into use. The coins were initially made of precious metals; like gold and silver. When the precious metals became too precious, ordinary metals were being used for making coins. Paper money or currency notes gradually took place of coins; although coins of smaller denominations are still in use.
The currency notes and coins are issued by the government of an authorized body. In India, the RBI (Reserve Bank of India) issues currency notes. On the Indian currency note, you can find a statement which promises to pay the bearer the amount which is mentioned on the currency note.
Advantages of Money:
Removes the coincidence of wants.Takes less storage space and is easier to carry.Liquidity of currency is easier.Now-a-days; many instruments are available through which it is not necessary to physically carry the currency.
Barter System: The barter system was used before the advent of money. People used to exchange one thing for another in this system.
Double Coincidence of wants: The double coincidence of wants is the major drawback of the barter system. It can be very difficult to find a person who can fulfill this condition. Suppose you want to barter your MP3 player with a game console, then you need to find a person who wants to barter his game console for an MP3 player.
Money
Money is a means by which we can get something in exchange. Initially, coins came into use. The coins were initially made of precious metals; like gold and silver. When the precious metals became too precious, ordinary metals were being used for making coins. Paper money or currency notes gradually took place of coins; although coins of smaller denominations are still in use.
The currency notes and coins are issued by the government of an authorized body. In India, the RBI (Reserve Bank of India) issues currency notes. On the Indian currency note, you can find a statement which promises to pay the bearer the amount which is mentioned on the currency note.
Advantages of Money:
Removes the coincidence of wants.Takes less storage space and is easier to carry.Liquidity of currency is easier.Now-a-days; many instruments are available through which it is not necessary to physically carry the currency.
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