Definition
Money, is the medium of exchange between people who are seeking a good or service.
Origin
Barter System
Before money, or currency, people traded items (barter system). For example, if one wanted to buy a shoe and had wheat to trade, he would find someone who would give him shoes in return of wheat. This is called double coincidence of wants. That is, exchanging goods for the exact item.
Cons with this system
- Availability of people with exact need.
- Lack of security and logistics
Valuable items
Well, people realised thatBarter System was bullshit. So they got valuable items like gold and silver to be traded.
Cons
- Lack of security
- Too valuable
Currency
So they derived to currency, namely coins (in the early days), and now, paper notes. In our India’s case:
- The currency (Rupees) cannot be refused by an Indian citizen as the method of transaction.
- The RBI issues the money (notes and coins) on behalf of the governments.
Types of Currencies now
- Paper Notes
- Coins
- Cheque / Demand Deposit
Backlinks
Flashcards
What is money? ? Money, is the medium of exchange between people who are seeking a good or service.
What is the barter system and its cons? ? Before money, or currency, people traded items (barter system). For example, if one wanted to buy a shoe and had wheat to trade, he would find someone who would give him shoes in return of wheat.
Cons with this system
- Availability of people with exact need. (Double coincidence of Wants)
- Lack of security and logistics
Why use a currency? ?
- Uniform medium of transactions In case of India, the currency cannot be refused by an Indian citizen as the method of transaction.
The {{RBI}} issues the money (notes and coins) on behalf of the governments.
Types of Currency? ?
- Paper Notes
- Coins
- Cheque / Demand Deposit