Economics (NTSE/Olympiad)  

3. Money and Credit

Money As Medium Of Exchange

Money As Medium Of Exchange
(1) It is an important function of money. It means that money act as an intermediary for the goods and services in an exchange of transaction. Use of money as a medium of exchange has removed the major difficulty of double coincidence of wants in the barter system.
(2) This function of money has classified all transactions on the basis of time and place. Now, the seller can sell the goods at any time & place goods at his Convenience.
Double coincidence of want :
It means both parties i.e. buyer and seller have to agree to sell and buy each other commodities. In barter system, double coincidence of wants is an essential feature. But when money is used it eliminates this requirement.
Advantage of Money :
1. It is used as a medium of exchange.
2. It offers economic freedom to the people.
3. It is used for purchasing goods and services.
4. It is easy to store money.
Measure of value :
Money serves as measure of value in terms of unit of account. Unit of account means that the value of each good or services is measured in the monetary unit.


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