BARTER SYSTEM HISTORICAL Introduction Money is something which is generally accepted as a medium of exchange It is one of the most basic and significant inventions of mankind Before money came into use exchange took place through barter system ie goods were exchanged for goods ID: 1027305
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1. MONEY BARTER SYSTEM AND EVOLUTION OF MONEY
2. BARTER SYSTEM- HISTORICAL Introduction-Money is something which is generally accepted as a medium of exchange. It is one of the most basic and significant inventions of mankind. Before money came into use, exchange took place through barter system, i.e. , goods were exchanged for goods. Definition-Barter means direct exchange of goods or barter refers to exchanging of goods without the use of money. For example, corn may be exchanged for cloth, house for horses, fruits for utensils and so on.
3. ADVANTAGES OF BARTER SYSTEMSimple systemNo Question of Under- Production, or of Un-Employment or of Over- Full EmploymentNo Problems of International TradeIdeal Utilisation of Natural ResourcesNo Problem of Concentration of Economic Power in one hand.
4. DIFFICULTIES OF BARTER SYSTEM Barter system involves various difficulties and inconveniencies which are discussed below:Double Coincidence of WantsAbsence of Common Measure of valueLack of DivisibilityThe Problem of Storing wealthDifficulty of Deferred PaymentsProblem Of Transportation
5. EVOLUTION OF MONEYINVENTION Of MONEY: In order to overcome the difficulties of barter system money was invented.According to Crowther- “Money is one of the most fundamental of all man’s inventions. Every branch of knowledge has its fundamental discovery. In mechanics its wheel, in science fire, in politics vote. Similarly, in economics, in the whole commercial side of man’s social existence, money is the essential invention of which all the rest is based.”
6. ORIGIN & DEVELOPMENT OF MONEYDEVELOPMENT OF MONEY: The origin of money is not known because of non-availability of recorded information; its deep rooted in antiquity. The evolution of money has been a secular process and shall continue to remain so, but the development of money in the present form can be historically traced as it has passed through different stages in accordance with the growth human civilisation.
7. STAGES OF DEVELOPMENT (OF MONEY)These stages are discussed below:Animal MoneyCommodity MoneyMetallic MoneyPaper MoneyCredit MoneyElectronic banking Stage
8. CLASSIFICATION OF MONEYMain types of money exist in a modern economy:1.Metallic money:Standard MoneyToken Money2.Paper Money:Representative Paper moneyConvertible Paper MoneyInconvertible Paper MoneyFiat Money3. Credit Money4. Near money
9. DEFINITION OF MONEYAccording to Walker, “Money is what money does.”Crowther defines it, “anything that is generally acceptable as a means of exchange and at the same time act as a measure and store of value.”
10. APPROACHES TO THE DEFINITION OF MONEY On the basis of the constituents of money, the following four approaches to the money are generally followed: Traditional Approach:M= C+DD(where C= currency, DD= demand deposits)Monetarist Approach:M= C+DD+TD(where C= currency, DD= demand deposits, TD= time deposit)
11. APPROACHES TO THE DEFINITION OF MONEY-…contdLiquidity Approach:M=C+DD+TD+SB+S etc(where C= currency, DD= demand deposits, TD= time deposit, SB= saving bank deposits, S= shares)The Central Bank Approach:M= C+DD+TD+NBFI+CUA
12. FUNCTIONS OF MONEYVarious functions of money can be classified into three broad groups:1.Primary Functions:Medium of ExchangeMeasure of Value2. Secondary Functions:Standard of Deferred PaymentsStore of ValueTransfer of Value
13. FUNCTIONS OF MONEY….contd3. Contingent Functions:Distribution of National IncomeMaximisation of SatisfactionBasis of Credit SystemLiquidity To Wealth
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