How can money be easily exchange itself for goods or services? Give example to explain.

 

Answer:

Points to Remember:

  • Money is used as an intermediary in the exchange process.
  • Money is used as a medium of exchange in every trade.

Answer to be written:

 We use money as an intermediary in the exchange process , that’s why it is also called a medium of exchange . Anyone with the money can exchange it for any goods or services.

 

  • For example:
    • If a shoe manufacturer wants to exchange his shoes for wheat , he first has to look for someone who not only wants to sell wheat but also wants to buy shoes in exchange, which is a problem because if a wheat seller refuses to exchange wheat for shoes then this trade won’t happen . That is where the money comes into place.

    • Here if money is used as a medium of exchange then the shoe manufacturer can sell his shoes to anyone in exchange for money and then buy wheat with that money. Hence, because money is used as an intermediary in this exchange process, it is called the medium of exchange.
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Davneet Singh

Davneet Singh has done his B.Tech from Indian Institute of Technology, Kanpur. He has been teaching from the past 14 years. He provides courses for Maths, Science, Social Science, Physics, Chemistry, Computer Science at Teachoo.