ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Divisibility is a characteristic which means the money can be divided into small units and that it can be used in exchange for goods and services. As to function as the medium of exchange, as it is divisible, it can be used to purchase all kinds of goods with different values.

Detailed explanation-2: -Divisibility is the property of a good that can be broken into smaller amounts without losing value. Because economic transactions frequently occur in varying amounts, a currency must be divisible to be used broadly in an economy.

Detailed explanation-3: -If someone wants to buy a smaller unit of a commodity, then divisibility of money can make it possible. For example, cows cannot function as good money. This is because you cannot divide a cow without making it lose its value.

Detailed explanation-4: -Why is it important for money to be divisible? It is necessary to be able to divide money so that it can be used to purchase items of lesser value as well as those of greater value.

Detailed explanation-5: -Money as a Unit of Account Due to money’s use as a medium of exchange for buying and selling and as a value indicator for all kinds of goods and services, money can be used as a unit of account.