Definition and Function of Money
Does Money only act as Store of Value?
No
Other assets also act as store of value, like Property, Gold, stocks etc
Why are these assets not used in place of money?
Because these are not easily convertible
Also they do not have universal acceptability
NCERT QUESTIONS
Question 2
What are the main functions of money?
How does money overcome the shortcomings of a barter system?
View answer
Ans
Main Functions of Money:
- Acts as Medium of Exchange
- Act as Convenient unit of Account
- Acceptable to Everyone (Universally Acceptable)
- It can be stored easily
- Easily Convertible to Other Commodities
How does money overcome shortcoming of barter system?
| PROBLEMS IN BARTER SYSTYEM | BENEFITS OF MONEY SYSTEM | |
|
Double Coincidence of Wants (Both person should need each other's goods) |
Want Can be of One person also (and not both) (Only one person may need good) |
|
| No Proper Unit of Account | Proper Unit of Account | |
| Difficult to Carry forward one's welath | Easier to carry forward money to future | |
| High Storage Cost | Money Can be easily stored | |
| Not Acceptable to Everyone | Universally accepted | |
| Lack of Divisibility | Easily Divisible | |
ASSERTION AND REASONING QUESTIONS
In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R).
Assertion (A): Money is what money does.
Reason (R): Money facilitates exchange of goods and services.
Mark the correct choice:
- Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of the Assertion (A).
- Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of the Assertion (A).
- Assertion (A) is true, but Reason (R) is false.
- Assertion (A) is false, but Reason (R) is true.
View answer
Ans
(a). Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of the Assertion (A).
Explanation
Money is defined as anything that acts as a medium of exchange.