Definitions [1]
Definition: Barter System
“The direct exchange of economic goods, one for another.” — Chandler
Key Points
Key Points: Barter System
The barter system’s limitations—double coincidence of wants, no standard value, storage issues, indivisibility, and deferred payments—led to the invention of money, which streamlined trade and economic growth.
Key Points: Functions of Money
- Money removes barter difficulties and supports smooth exchange.
- Primary functions: medium of exchange and measure of value/unit of account.
- Secondary functions: standard of deferred payments, store of value and transfer of value.
- Contingent functions: maximise utility and profit, distribute national income, support credit and provide liquidity.
- Overall, money is “a medium, a measure, a standard, a store” with transferability added by some authors.
