Theory question 107
Money and InflationSection B: answer three questions only from this section.
State any five reasons why the use of money has replaced the barter system in modern economic transactions.
Show the model answer
Model answer
Money removes the problem of double coincidence of wants
Money is a common measure of value, so prices are easy to state
Money is divisible into small units, unlike many goods
Money is portable and easy to carry
Money is a store of value; it does not perish like many goods
Money makes deferred payments (credit) possible
Money encourages specialisation and large-scale trade
Money makes accounting and record-keeping easy
Explanation
Each reason is a problem of barter that money solves.