What is money?
An item that accepts everyone as a medium of exchange
It is widely known as purchasing goods and services and repayment of debts.
So here money is the medium of exchange of milk and money
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| Money its Types and Evolution and Barter System | IndianTechnoEra |
Before the Money...
Initially, people exchange and use the commodity or goods of other people to just exchange things without any third medium using what was known as Barter System.
What is Barter System?
Directly exchange from one commodity of services to another without any medium.
- Traditionally exchange In small-scale societies
- Money crises and currency volatile
- Face-to-face process
What are the drawbacks of the Barter System?
- Inefficient and unreliable
- Can’t store value for later use
- Can’t use as a unit of account
- Unattractive from a commercial perspective
- Highly complex as gaunt fair exchange at attempts
- Some thyme become difficult on different commodities
What is the application of the Barter System?
- Alternate to traditional change-only transactions - tomato & eggs
- (Ancient people trade goods directly to swap items without using money
- Flexible and can assist people who cannot pay for the services they require.
How does bartering work nowadays?
- Between individuals: People mutually determine item value and exchange an amount for each item.
- Between companies: One company barters its goods and services in exchange for goods or services from another company. This eliminates currency fluctuations, especially when foreign exchange is involved.
- Between countries: a country exports certain goods to another country, in exchange for goods that it needs from there another country. This can help to manage debt and triage deficit. Import-export of goods between the countries on the need of goods and help to manage debt and trade deficit
Early the ancestors used a barter system to exchange goods. Some situations rise the problem to think about the basis of exchange
As for: One people have rice but need milk And the other has milk but needs clothes
What was the need for money invented?
The method of bartering did not have the ease of transferability that eventually led to the invention of Money.
Money by economics:
Medium of exchange, is a unit of accounting that allows people to make any transaction.
What are the properties of money?
- Interchangeability
- Repeated usage
- Transferable
What are the types of money?
There are the following types of money-
- Fait money
- Commercial money
- Fiduciary money
- Commodity money
What is fiat money?
A tie of currency issued by the government legally. Not involve physical commodities like gold and silver.
Example: the US Dollar, Euro, Rupees, Pounds, etc.
What is commercial money?
A type of currency generated by my commercial bank that is responsible for making money by providing lands. It can be in any form of personal loans, mortgages, etc.
Ex: paper orders like checks, electronically like debit cards, wire transfers, and internet payments.
What is fiduciary money?
A type of currency involves test-based money between payer and payee rather than a NY official involvement of the government.
Ex: A paper order means a check can be fiduciary money.
What is commodity money?
A commodity value-based money. These commodities hold an inner value of their own. It varies from commodity to commodity.
Ex: include gold, silver, and copper