Welcome to the NCERT Solutions for Class 12 Macro Economics - Chapter Money and Banking. This page offers a step-by-step solution to the specific question from Exercise 1, Question 1: . With detailed answers and explanations for each chapter, students can strengthen their understanding and prepare confidently for exams. Ideal for CBSE and other board students, this resource will simplify your study experience.
What is a barter system? What are its drawbacks?
Barter system is a system that was used in ancient times to exchange goods. In Other words, this system was used to exchange one commodity for another before the monetary system came into existence. For example, if a person having rice wants tea, then he can exchange rice with a person who has tea and needs rice. The economy having the barter system was called ‘C-C economy’, i.e. commodity is exchanged for commodity.
The various drawbacks of the barter system are as follows:
1. Problem of double coincidence of wants
Double coincidence of wants implies that needs of two individuals should complement each other for the exchange to take place. For example, in the above case, the second person must need rice in exchange for tea.
2. Lack of common unit of value
Under the barter system there was no common unit for measuring the value of one good in terms of the other good for the purpose of exchange. For example, a horse cannot be measured in terms of rice in the case of exchange between rice and horse.
3. Difficulty in wealth storage
It was very difficult to store commodities for future exchange purposes. The perishable goods like grains, milk and meat could not be stored to exchange goods in future. Therefore, wealth storage was a major difficulty of the barter system.
4. Lack of standard of deferred payments
The future payments could not be met in a C-C economy (barter system) as wealth could not be stored. It was very difficult to pay back loans.
NCERT questions are designed to test your understanding of the concepts and theories discussed in the chapter. Here are some tips to help you answer NCERT questions effectively:
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Read MoreWelcome to the NCERT Solutions for Class 12 Macro Economics - Chapter . This page offers a step-by-step solution to the specific question from Excercise 1 , Question 1: What is a barter system? What are its drawbacks?....
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