MONETARY SYSTEM
AGO
,Money
Definition-Money refers to anything generally accepted/acceptable as a
medium of exchange used to effect transaction or to discharge/settle
debt.
Before any money came into being, the system of exchange was barter
where there was a direct exchange of goods for goods, goods for services
or --services for services.
This system was associated with different problems;
i. Lack of doubled coincidence of wants. It was very difficult to get one who
has got what you want and at the same time wiling to exchange it for
what you have.
,Problems of barter trade
ii) Indivisibility of some commodities. Some commodities could not be divided
up into small units to effect small transactions for example if one had a cow
for exchange but another had a tin of beans, if one needed 2kg of beef then
it became difficult to get them for a cow.
iii) Difficulty in determining the exchange rates for example how many cocks
for a cow.
iv) Some commodities were perishables which made future trade impossible.
, Problems of barter trade
v) Limited storage facilities that some goods are bulky and others are
perishable.
vi) Difficulty in transportation given the bulkiness of some products and
existence of poor roads.
vii) Barter trade system encourages dependence on economy by other
economy and in case of conflicts a country may suffer.
viii) It lead to loss of value of utility when one gives up more goods and gets
less in terms of value.
AGO
,Money
Definition-Money refers to anything generally accepted/acceptable as a
medium of exchange used to effect transaction or to discharge/settle
debt.
Before any money came into being, the system of exchange was barter
where there was a direct exchange of goods for goods, goods for services
or --services for services.
This system was associated with different problems;
i. Lack of doubled coincidence of wants. It was very difficult to get one who
has got what you want and at the same time wiling to exchange it for
what you have.
,Problems of barter trade
ii) Indivisibility of some commodities. Some commodities could not be divided
up into small units to effect small transactions for example if one had a cow
for exchange but another had a tin of beans, if one needed 2kg of beef then
it became difficult to get them for a cow.
iii) Difficulty in determining the exchange rates for example how many cocks
for a cow.
iv) Some commodities were perishables which made future trade impossible.
, Problems of barter trade
v) Limited storage facilities that some goods are bulky and others are
perishable.
vi) Difficulty in transportation given the bulkiness of some products and
existence of poor roads.
vii) Barter trade system encourages dependence on economy by other
economy and in case of conflicts a country may suffer.
viii) It lead to loss of value of utility when one gives up more goods and gets
less in terms of value.
