Money occupies a distinct position in a modern capitalist economy. In the absence, the whole prosperous financial life would collapse favor a fill of cards.

You are watching: Advantages of money over barter system

The advantages or supplies of money have the right to be best understood through considering the system in i m sorry money is absent.

1. Money has overcome limit of barter system. We have read drawbacks of barter system which do exchange process burdensome and highly inefficient. In fact, money was developed by the culture to conquer these drawbacks.

The barter system suffers from 4 main drawbacks, every of i beg your pardon is get rid of by a specific function of money as explained below:

(i) Money as tool of exchange solves the barter’s trouble of absence of dual coincidence of desires as money has separated the plot of sale and purchase. You can sell items for money come whosoever desires it and with this money you can buy items from whosoever desires to market them.

Money is accepted as tool of exchange. Civilization exchange goods and services through tool of money as soon as they buy items or offer goods. Thus, money becoming intermediary solves barter’s trouble of dual coincidence of wants.

(ii) Money as measure (unit) of value or a unit the account solves the barter’s difficulty of absence of usual measure (unit) the value. Money serves as a unit of value or unit of account and acts together a yardstick to steps exchange worth of all commodities. The worth of each great or service is expressed as price (i.e. Money units) which guides both consumer and also producer to do a transaction. Thus money makes maintaining of company account possible.

(iii) Money as store of value solves the barter’s trouble of difficulty in storing wide range (or generalised purchase power). Moreover, money in convenient denominations (like Indian coins that 5, 10, 20, 50, 100 paise and also currency note of 2, 5, 10, 100, 500, and also 1,000) solves the barter’s problem of lack or lack of divisibility. (Coins of less than 50 paise are no longer in use now.)

(iv) Money as typical of deferred payments help to resolve the barter difficulty of absence of standard of deferred payment. Again, it help to make contracts i m sorry involve future payments. Doubtlessly money help in remove the difficulties of barter system.

2. That facilitates exchange that goods and also services and helps in carrying on trade smoothly. The present highly facility economic mechanism will not exist without money.

3. Money help in maximising consumers’ satisfaction and also producers’ profit. That helps and also promotes saving.

4. Money disclosure specialisation which rises productivity and also efficiency.

5. It facilitates plan of both production and consumption.

6. Money have the right to be utilised in reviving the economy from depression.

7. Money permits production to take location in advancement of consumption.

See more: When A Girl Says Maybe To A Date Does She Mean No? Why Would A Girl Say Maybe

8. That is the college of money which has actually proved a beneficial social tool of promoting financial welfare. The whole economic science is based on money; financial motives and activities are measure by money.

Related Articles

Money: advantageous Notes on advancement of Money – Discussed!
Commercial Bank: Definition, Function, credit transaction Creation and Significances

Welcome to! ours mission is to administer an virtual platform to assist students to comment on anything and everything around Economics. This website has study notes, research papers, essays, articles and also other allied information submitted by visitors choose YOU.