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Questions and Answers
Which of the following is a disadvantage of the barter system?
What does the money system encourage compared to the barter system?
Which one of the following is NOT a primary function of money?
Which aspect of the barter system directly relates to the inconvenience of finding trade partners?
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Which characteristic makes money effective in measuring the value of labour, capital, land, and other economic measures?
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Study Notes
Barter System
- No risk of counterfeit currency
- Easy to trade with no need for small change (e.g., Rs.2/-)
- Requires double coincidence of wants, meaning both parties must have what the other wants
- Involves high search costs and transaction costs
- Storage of perishable goods can lead to loss of value
Money System
- Encourages specialization and division of labor
- Allows for measurement of value of labor, capital, land, and goods
- Enables easy transfer and transportation of value
- Is divisible, meaning it can be divided into smaller units
- Is fungible, meaning each unit is interchangeable with another
Primary Functions of Money
- Measures value, making it a standard unit of account
- Acts as a medium of exchange, facilitating transactions and trade
- Is widely accepted, making it a convenient store of value
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Description
This quiz covers the pros and cons of the barter system and how it differs from the money system in economics. Learn about the advantages and disadvantages of each system.
