There is an age old memorable saying which says â€˜time is moneyâ€™. But, today we donâ€™t practically need to understand this. Since all the time we are racing against the clock to finish up are daily chores. Instead of that It would be rather more logical to say it in context to the economic world thatâ€˜money is time’.
I have intentionally used the term â€˜economic’ here because you should know that money is just a mutual need. The foundation of modern economy is the monetary trade. As a matter of fact it is not everything. Before money came into existence there was a more important way of trading called the barter system.
Itâ€™s important yet fascinating to learn how the monetary transaction came into existence from the roots of barter. For this you need monetary system v/s barter system homework help from the useful online sources like tutoring websites.
Significance of Transactions
Whenever you visit a coffee shop or a retail store, you pay the green bills (money) printed with a certain value minted on it in exchange to the product you buy. We call this bill as the dollar (every nation uses a different name for these bills they own).
Now, this way the dollars are accumulated by the owner of the shop. Later on he uses the same money to carry a purchase for something he needs. So, this money reaches the third person. Hence the chain of transaction goes on and on and the money keeps circulating. We call this method of exchange as monetary system. This plays a significant role in our lives and the economy of the nation.
Similarly, the ancient era had a primitive yet effective method of trading known as barter system.
History of Barter System
What is barter system? It is a medium of transaction where the goods and services are bought in exchange of other goods and services.
For example, wheat was bought in exchange of animal skin.
Initially, the bartering of livestock was done. Gradually, as agriculture became more dominant, the agricultural harvest was bartered.
Goods such as wheat, salt, weapons, spices and tea were exchanged among the people according to their needs.
At one point of time salt was regarded as a valuable asset. It was given to soldiers as salaries.
Knowing about history of this ancient system is essential to understand. It shows that there was a time, when there existed something more precious and valuable than money.
If you want to know about the long gone era of this system, you can avail tutoring sessions from homework help websites. This would also guide you in monetary system v/s barter system homework help.
Disadvantages of Barter System over Benefits
There are fewer benefits of barter system compared to its disadvantages. Few are mentioned below.
- A double coincidence of wants is inevitable -If the one party offers a commodity, the other party should exactly be willing to wanting it and vice versa. If the wants of both the parties donâ€™t match, exchange of goods or services cannot take place.
- Lack of valuation â€“there is no valuation method or measure of value used in barter system. Since the commodities have no equal values, the ratio is arbitrarily fixed according to the necessity of the bartering parties.
- Inseparability Of Goods â€“ There are certain goods which cannot be measured and divided. Speculate that one barterer has a cattle and the other has a pair of clothes. According to the arbitrary ratio fixed for exchange, one half of the cattle is equal to the pair clothes. It is understood that a living cattle cannot be divided into half and exchanged. Hence complexities arise here.
- Incapability of wealth storage â€“Many commodities like food and animal is impossible to store for future use. Since these products degenerate.
Though barter system has some drawbacks, it is still practiced in some parts of the world.From small scale to large scale businesses to multinational companies, use barter system even today.The US Department of Commerce and the GATT(General Agreement On Tariffs and Trade) have reported that 25-30% of world-wide transactions are based on barter system.
Monetary System â€“ The Base of Modern Capitalist Economy
Money has proved to be an efficient medium of exchange and has the potential to overcome all the drawbacks of the barter system. One can buy or sell anything to anyone who wants it.
Money came into existence due to the inefficiency of barter system.It has a specific value or unit which helps in fair transaction. It can be stored or saved for future use.
Due to these beneficial aspects of money, monetary transaction is predominantly used by everyone.
There are lot of underlying benefits of monetary system in Economics which can be learned online from professional tutors.
Tutoring Websites for Monetary System V/S Barter System Homework Help
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