Meaning and Functions of Money

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Money is a thing which is commonly accepted as a medium of exchange. It is used in buying goods and services and in paying debts. For example, currency notes and coins are accepted in daily transactio…

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Money became necessary because people depend on one another for different goods and services. It made exchange easier by removing the need for direct barter. It also helped in buying, selling, saving,…

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Barter system is a system in which goods are exchanged for other goods and services are exchanged for goods directly, without using money. It was used before money became common.

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The economic system based on barter is called barter economy or C-C economy, where C stands for commodity. In this system, commodity is exchanged for commodity.

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Double coincidence of wants means the simultaneous fulfilment of mutual wants by buyers and sellers. In barter, one person must have what the other wants, and also want what the other has. This is rar…

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Money removed this difficulty by acting as a common medium of exchange. A person can sell goods for money and then use that money to buy any other needed good or service. This avoids the need for both…

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In barter, there is no common unit for comparing the value of different goods. For example, the exchange rate between two goods may be fixed in different ways, making fair comparison difficult. Money …

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Some goods cannot be divided without losing value. For example, a big indivisible item cannot be exchanged properly for a small item. Money avoids this problem because it can be divided into smaller u…