Advertisements
Advertisements
Questions
Explain the significance of 'medium of exchange' function of money
Explain the medium of exchange function of money.
Explain the significance of 'medium of exchange' function of money.
Advertisements
Solution
Medium of exchange:The primary function of money is to act as a medium of exchange between two parties involved in a transaction. It avoids the practical problems of wastage of time and resources involved in the barter system of exchange and it improves the efficiency of the transaction. It promotes allocation efficiency in the trade and production of goods and services. For the barter system, the sale and purchase of goods occurs at the same time. Their sale and purchase value also remains equal at that point. A person can purchase or sell goods with cash without selling or purchasing any good at that point, after money came into existence. Thus, the act of purchase and sale has been separated. Thereby the medium of exchange facilitated sale and purchase very easily in terms of monetary value.
APPEARS IN
RELATED QUESTIONS
Write answer in 'one' or 'two' paragraph .
Explain the primary functions of money.
State whether the following statements are TRUE or FALSE with reason.
Cheque is not legal tender money.
What is a barter system? What are its drawbacks?
Fill in the blank with appropriate alternatives given below
Medium of exchange is __________ function of money.
______ is the primary function of money.
Money is something that is ______.
Money on wings indicates ______.
Medium of exchange and measure of value is ______.
Which of the following are the functions of money?
Identify the correctly matched pair of items in Column A to that of Column B.
| Column A | Column B | ||
| 1. | supply of money | a | Money in circulation at a point |
| 2. | Stock of Money | b | Supply of money considered over a period |
| 3. | Flow of Money | c | Money held by Public and the Bank today |
| 4. | Reserve Money | d | Supply of money studied at a point of time |
“The value of all goods and services can be expressed in monetary units.”
On the basis of the given statement, identify the function performed by money:
What does money provide when individuals compare prices to determine the worth of goods?
Paying rent each month is an example of which primary function of money?
Why is money called the most liquid asset?
Who is known for classifying the functions of money into primary, secondary, and contingent functions?
