Theory question 112
Money and Inflation(a) Outline any four problems of barter economy.
(b) How has the introduction of money solved the problems outlined in 12(a) above?
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(a) Any four: double coincidence of wants; lack of a common measure of value; indivisibility of goods; difficulty of storing wealth (perishable goods); no standard for deferred payment; difficulty of transporting goods.
(b) Money as a medium of exchange removes the need for double coincidence of wants; as a unit of account it gives a common measure for valuing goods; it is divisible into small units so any quantity can be bought; as a store of value it allows wealth to be kept; as a standard of deferred payment it makes credit and borrowing easy; it is portable.
Match each barter problem with the function of money that solves it.