NCERT Solutions Class 12 Economics Money

NCERT Solutions Class 12 Economics Money. NCERT book for Economics in class 12 is strongly recommened by teachers and the CBSE and NCERT boards. Please download the NCERT solutions for class 12 Economics free in PDF made by teachers of the best schools in India. These solutions are carefully compiled to give detailed understanding of the concepts and also steps of solutions. The NCERT solutions are free to download in pdf format. Please refer to the download link below to download the pdf file and also refer to other chapters and subjects to get the solutions to Economics NCERT book questions and exercises.

Economics Money

1. What is Barter system? What are its drawbacks? [3 Marks]

Ans: Barter system of exchange is a system in which goods are exchanged for goods.

It’s Drawbacks are:

1. Lack of double coincidence of wants.

2. Lack of divisibility.

3. Difficulty in storing wealth.

4. Absence of common measure of value.

5. Lack of standard of deferred payment.

2. What are the main functions of money? How does money overcome the shortcoming of a barter system? [6 Marks]

                                                                                     Or

Explain the problem of double coincidence of wants faced under barter system. How has money solved it? [CBSE 2013 ]

Ans:

1. “Money is a matter of the following four functions: A medium, a measure, a standard, a store”.

2. Money has overcome the short coming of a barter system in the following manner:

(a) Medium of exchange

• Under barter system, there is lack of double coincidence of wants.

• With money as a medium exchange individuals can exchange their goods and services for money and then use this money to buy other goods and services according to their needs and conveniences.

• A buyer can buy goods through money and a seller can sell goods for money.

(b) Measure of value

• Under barter system, there was no common measure of value. Money has also solved this difficulty.

• As Geoffrey Crowther puts it, “Money acts as a standard measure of value to which all other things can be compared.” Money measures the value of economic goods.

• Money works as a common denominator into which the values of all goods and services are expressed.

• When we express the values of a commodity in terms of money, it is called price and by knowing prices of the various commodities, it is easy to calculate exchange ratios between them.

(c) Store of value

• Under barter system it is very difficult to store wealth for future use.

• Most of the goods are perishable and their storage requires huge space and transportation cost.

• Wealth can be conveniently stored in the form of money.

• Money can be stored without loss in value.

• Money can easily be stored for future use.

(d) Standard of deferred payments

• Under barter system, transactions on deferred payments are not possible.

• With money, the debtors make a promise that they will make payments on some future dates. In those situations money acts as a standard of deferred payments.

• It has become possible because money has general acceptability, its value is stable, it is durable and homogeneous

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