ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Money’s most important function is as a medium of exchange to facilitate transactions. Without money, all transactions would have to be conducted by barter, which involves direct exchange of one good or service for another.

Detailed explanation-2: -Money is important to an economy, however, because as it replaces barter it makes exchange less costly. As a result, people are more likely to specialize in what they produce, using money to buy what they want to consume, thus increasing overall levels of production and consumption in a nation.

Detailed explanation-3: -Currency serves as a medium of exchange, resolving mismatched demands associated with the barter system. In early civilizations, common agreed-upon goods, such as animal skins or salt, served as a currency that individuals could exchange for goods and services.

Detailed explanation-4: -1) Money works as a store of value. 2) Any commodity cannot act as money. 3) Barter System had many difficulties. 4) Money is the basis of credit.

Detailed explanation-5: -barter, the direct exchange of goods or services-without an intervening medium of exchange or money-either according to established rates of exchange or by bargaining. It is considered the oldest form of commerce.