Questions Assignment Example | Topics and Well Written Essays - 2000 words

Questions - Assignment Example Moreover, sub-division of goods was necessary without which the barter system could not take place (Suri, Budhiraja and Rajput 2005). Some of the other problems associated with barter system were in storing the materials that would be used for exchange. Since they were in material forms, they required enough spaces, for example materials like rice, grains, etc. Facilities of credit could not be made available in this system. Also, difficulty was faced in transferring the goods and products from one place to another (Suri, Budhiraja and Rajput 2005). In a barter system, even when the number of commodities would be few, the exchange rates for different products and goods became burdensome (Thomas 2005). The establishment of the monetary system has improved upon the barter system owing to different reasons. The barter system has proved to be a system that caused inconvenience for the reasons mentioned above. With all its associated difficulties, the scope and scale of trade became limit ed with use of a barter system. The monetary economy eliminated such difficulties. Money could be used for the purchase of products where the value of the goods could be measured and monetary payments done accordingly. In the monetary system, thus goods are exchanged with money. ... With the new system, the economy of the world could be seen to specialize with higher levels of labor divisions as well. While in the barter system only tangible assets could be used for economy; in the monetary economy, money could be included in the list of assets of any individual. Thus savings is possible to be achieved more in the monetary economic system, where investments can be made with the money depending on need and time. With the monetary economy in place, problems with consumption and distribution have been found to be solved, leading to better investment measures in the economy as well (Kolars et al 2013). Thus it can be said that the establishment of monetary economy has improved upon the previous barter economy. Solution 2: Considering the introduction of money in the economic system of the world, all forms of money are actually incorporated. Thus money could be in the form of anything, any goods or products having some intrinsic value, or that which might not have an y intrinsic value (Karimzadi 2012). Money does not possess any inherent value of its own. It is valuable because people are in needed, while its supply is limited. Goods and products are the most essential factors in the economy. Money is essential as it allows to purchase or sale such needed goods and products. However, the value of money gets affected or influenced depending on factors like inflation that severely affects trade and business activities and people tend to react badly in such situations. Increase in supply of money leads to conditions like inflation in an economy, resulting to increase in prices of goods and products. Hence, essentially the value of