Question

Why are transactions made in money? Explain with suitable examples.​

Answer 1

Everyone prefers to receive payments in money and then exchange the money for things they want.

For example, take the case of a blacksmith. The transactions are made in money because a person holding money can easily exchange it for any commodity or service that he or she wants.

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Answer 2

Answer:

Transactions are made in money Because money is easily acceptable. A person holding money can easily exchange it for any commodity or service that he or she might want.

Transactions are always made in money to avoid the problem of DOUBLE COINCIDENCE OF WANTS. Double coincidence of wants means that a person needs to sell any thing that the other person exactly needs to buy.

For example--Suppose a shoe-sellar wants to sell his one pair of shoes to anyone to get some wheat as he does not have wheat.Now he would have to look for a person who not only has wheat but also who is willing to buy the pair of shoes...So,both parties have to agree to buy each other things..This happens very rarely...usually only in barter system.

So,Now if a shoesellar has money and wants to get wheat,he can easily exchange his pair of shoes for money and then by that money,he can easily buy wheat.

So, since all transactions are made in money, it is also known as medium of exchange.

hope this helps... :)