Explanation
Barter system of exchange had many difficulties like lack of double coincidence of wants, lack of a common unit of value, difficulty of future payments or contractual payments and difficulty of storage of value and transfer of value.
Introduction of money which refers to a common medium of exchange that is issued under the law of government and acts as a legal tender for the whole country removed the difficulties of barter system through its various following functions:
1. Common medium of exchange
2. Store of value
3. Common measure unit
4. Serve as the standard of deferred payments
Token coins are such coins whose face value is greater than is commodity value. In other words, its face value is greater than its intrinsic(commodity) value. For example- the ten rupee coin in India has a very low commodity value as compared to its face value which is 10 rupees.
Barter system was a system of exchange where goods were exchanged for goods and there was no common medium of exchange in the economy. Barter system had many difficulties like lack of double coincidence of wants, lack of a common unit of value, difficulty of future payments or contractual payments and difficulty of storage of value and transfer of value.
Money refers to a common medium of exchange that is issued under the law of government and acts as a legal tender for the whole country. The primary function of money includes money as a medium of exchange where it refers to a function of money in which money is considered as a mode of exchanging goods. This function of money solved the main problem of barter system which was double coincidence of wants.
Representative Money type of money refers to money which is usually made of paper. The value of representative money is much higher than its value as a commodity. It is accepted as money as it can be conveniently used for carrying out transactions. Paper money is 100% backed by metallic reserve of either gold or silver and is redeemable at the option of the holder. It is also known as Representative full-bodied money.
Barter system was a system of exchange where goods were exchanged for goods and there was no common medium of exchange in the economy. Under this system, people exchanged commodities for commodities to satisfy their wants. Like a person who had 1 kg of rice and wanted 1 kg of wheat could exchange the rice with another person who had 1 kg of wheat and wanted 1 kg of rice instead.
Money serves as the standard of deferred payment. Deferred payments refer to payments made on loans, salaries, pensions, insurance premium, interests, and rents. The necessary condition for deferred or credit payment is that the amount of repaid money should be the same as it was at the time of purchase of the good. Since all the goods and services can be expressed in terms of money, it makes the future payments easy and functional which makes money the basis for generating credit in the economy. But sometimes credit money can be refused owing to the natural appreciation or depreciation of commodities with time due to which their monetary value at the time of deal does not match with their monetary value at the time of payment.
Money refers to an asset in the economy that acts as a common medium of exchange issued under the law of government and acts as a legal tender for the whole country. The money possess that following characteristics
The core of all forms of money throughout the history of mankind is faith. Suppose you sell a pack of cheese to somebody and they give you a hundred rupee note. Why do you accept that worthless piece of paper in exchange of the real commodity which you can actually consume. The reason is faith, you have faith that when you take that piece of paper to somebody they will also accept it and give you something real that you want. If you feel that nobody will accept that paper then you won't accept it either. So what money does? It makes transactions easier. And help overcome the limitations the barter system. Anything can be used as money if everybody is willing to accept it in transaction. It should be generally acceptable to people. It could be virtually anything from a piece of plastic, stamp, buttons etc. Given of course everybody believes in those things and has confidence in them. In past even bars of clay has been used as money in some civilizations. So that's what money does. Anything that do this function is money. So money is what money does. Hence, correct answer is option A.
Money market refers to the market where money is traded just as a commodity between two parties. It is a part of financial market where money is used as a financial assets for short term borrowing, lending, buying and selling which matures in less than a year. Since money is given and taken on credits in this market, therefore it is also known as credit market.
Limited legal tender refers to the portion of legal tender in the economy which consist of smaller units of money like a unit coin etc. For example in case of India, 50 paise coins and 25 paise coins are the limited legal tender which can be offered as legal tenders to clear the dues of 10 rupees and 1 rupee respectively. The highest amount which can be cleared using limited legal tender and which is generally accepted in the economy is Rs. 25.
Barter system was the oldest system of money where goods were exchanged for goods and there was no common medium of exchange in the economy. Under this system, people exchanged commodities for commodities to satisfy their wants. For example: a person who had 1 kg of rice and wanted 1 kg of wheat could exchange the rice with another person who had 1 kg of wheat and wanted 1 kg of rice instead.
Time deposits refers to the deposits with the commercial banks which can be withdrawn from the account holder's account after the expiry of a specified period of time. Savings do not form a part of time deposit as it is a part of demand deposit because any amount up to the limit of the credit balance can be withdrawn as per the wish of the account holder. Therefore, savings deposit does not form a part of time deposit.
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