The economic system which
functions without the use of money is given the name of barter
system. In other words the economy which lacks any
monetary media and the goods are exchanged with goods directly
is a representative of barter system.
With the passage of time the
barter system lost its efficacy. Hence it was thought for some
commodity which could be used to represent the values of goods
and services. Moreover such commodity could be acceptable to the
trading parties with out any hesitation.
"Money is a commodity which is generally
acceptable as a medium of exchange and at the same time it acts as a measure and
a store of value".
According to classical economists money is just a medium of
exchange and it can not influence the income and employment
of a country.
According to Keynesian Economists money has an other role to
play which is as a store of value. They said that due to this
role of money a link is established between present and
The monetarists which are known as modern friends of
classical economists have much more similarity regarding
representative money or modern money, the following
types of money remained in operation:
Barter system was furnished with the
situation of non-existence of double coincidence of wants. The
trade under barter system could only take place if there existed
coincidence between wants.
We know about barter system and its demerits.
The barter system had such a problems that they could be removed only by
inventing money. Therefore, the importance of money can be judged from the
The commodity which is to serve as money should have following properties or
qualities: Continue reading.
The money as medium of exchange played an important role by
having put to an end the demerits of barter system. But if we observe the
present day problems we find that money also played an important role in
creating and promoting these problems.
The main objective of money is to arrange transaction between different
people and business organizations. The money and incomes are closely related. As
most of the incomes are obtained in money. Hence people keep their wealth in