Question

Why did money called a mediun of exchange ?or why do banks ask for collateral while giving loans?

Answer 1

ANSWER....


money is called the medium of exchange as it is something which is used for transactions. it is money which is used by people to get the commodity of his choice where earlier different product word used for change, now money is used. money include coin, note and even electronic transactions are valid now.



Bank ask for Collateral while giving credit to border word because if border word fails to repay the loan the bank has right to use or sell the Collateral given to him by the borrower so that they can get money which they give him as a loan. if the borrower gives the loan in the time then the bank give Collateral back to the borrower.





$hope \: it \: helps$
$thanks....$

Answer 2

Hi there,

Money is called the medium of exchange because it represents the worth of a country's economy and its value. In older times, people used to exchange material objects to buy material objects. Later a standard was set in terms of money which is now used as  a medium of exchange.

Banks tend to ask for collateral in terms of giving loans for the sake of security. This to save the bank from any loss. When loan takers fail to return the loans they took, the bank has the authority of recruiting their money from the collateral they submitted. This saves them and keep their bank from bankruptcy.

I hope the answer is helpful.

Thanks