Write three advantages of money as a medium of exchange and three disadvantages of barter system.
Answers
Explanation:
Advantages and disadvantages of Barter
Advantages
Some of the advantages of Barter system are:
°It is a simple system free from the complex problems of the modern monetary system.
°The problems of international trade, like foreign exchange crisis and adverse balance of payments, do not exist in the barter system
°Personal and natural resources are perfectly utilized to meet the requirements of the society without involving any wastage.
Disadvantages
Besides the above mentioned advantages, there are also certain disadvantages to the system. These include:
°Absence of common measure value
Money plays the role of a measure of value of all goods in a monetary economy thus being helpful in measuring their values against each other. This role might be absent in a barter economy
°Invisibility of certain goods
A barter transaction cannot occur if an individual wants to buy a certain amount of goods but only has single invisible unit of another good which is worth more than what the individual wants to obtain.
°Lack of standards for deferred payments
This drawback is associated with the absence of a common measure of value, even though if the debt is denominated in units of the product or service that will be used eventually in payment, it is not a problem.