Exchange of goods for goods. Barter is direct exchange of goods for goods.

Which is a difficulty of the barter system?

Lack of a common measure of value. There was no standard unit for value.

Double coincidence of wants is guaranteed

'Money is what money does' is the view of:

Walker. Prof. Walker gave this functional definition.

The first form of money in the evolution of money was:

Animal money. Animal money (cow, goat) was used in the protohistoric period.

Secondary function. It is one of the secondary functions.

Maharashtra State Board · HSC Commerce · Class 11 (Std XI)

Class 11 Economics Chapter 2: Money

Short notes, key concepts, quick revision and practice MCQs with answers

Money was created to remove the difficulties of the barter system. The chapter covers the problems of barter, definitions of money, its evolution, its functions and the problem of black money.

Key concepts: Money

Barter system: Exchange of goods for goods.
Difficulties of barter: Lack of double coincidence of wants; no common measure of value; difficulty of storing goods; indivisibility of goods; difficulty of deferred payments.
Definitions: Crowther: money is anything generally acceptable as a means of exchange and a measure and store of value. Walker: 'Money is what money does'.
Evolution of money: Animal money, commodity money, metallic money, paper money and then modern forms such as plastic and digital money.
Primary functions: Medium of exchange and measure of value.
Secondary and contingent functions: Secondary: standard of deferred payment, store of value, transfer of value. Contingent: distribution of national income, basis of credit, liquidity.

Quick revision: important points

Modern money = result of evolution, not revolution.
Animal money was replaced due to indivisibility; commodity money due to storage problems; metallic due to scarcity and non-uniformity.
Black money = income that is not declared for tax purposes.

Practice MCQs with answers

Barter system means:
1. Exchange of goods for money
2. Exchange of goods for goods
3. Borrowing money
4. Storing gold
Show answer
Answer: B. Exchange of goods for goods
Barter is direct exchange of goods for goods.
Which is a difficulty of the barter system?
1. Double coincidence of wants is guaranteed
2. Lack of a common measure of value
3. Easy storage of goods
4. Divisible goods
Show answer
Answer: B. Lack of a common measure of value
There was no standard unit for value.
'Money is what money does' is the view of:
1. Crowther
2. Walker
3. Marshall
4. Smith
Show answer
Answer: B. Walker
Prof. Walker gave this functional definition.
The first form of money in the evolution of money was:
1. Paper money
2. Metallic money
3. Animal money
4. Plastic money
Show answer
Answer: C. Animal money
Animal money (cow, goat) was used in the protohistoric period.
Store of value is a:
1. Primary function
2. Secondary function
3. Contingent function
4. Not a function
Show answer
Answer: B. Secondary function
It is one of the secondary functions.

All Class 11 Economics chapters

Class 11 Economics notes: all chapters