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Explain the 'Standard of Deferred Payment' Function of Money. How Has It Solved the Related Problem Created by Barter? - Economics

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Explain the 'standard of deferred payment' function of money. How has it solved the related problem created by barter?

Explain the significance of the 'Standard of Deferred Payment' function of money.

Explain the 'standard of deferred payment' function of money

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Solution

Standard of deferred payment:-

Deferred payments refer to those payments which are made in the future. Money has made deferred payments easier. When money is borrowed, the principal and interest amounts have to be returned to the lender. However, these transactions are not possible in terms of goods and services. Money performs this function more effectively.

Under the barter system, it was very difficult to make future payments and contractual payments such as salaries, loans, interest payments, etc. For example, it was difficult to decide whether wages to a labour are to be paid in terms of food grains or any other commodity. This is because it was difficult to value the services of labour in terms of a commodity. Similarly, if a loan is taken in the form of a commodity, then the problem will arise in its repayment. However, as superior to the Barter system, money made the system of deferred or contractual payments such as. Salaries, interest payments, etc. possible. For example, a worker working on the contract basis can be easily paid in terms of money.

Concept: Standard of Deferred Payment
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