The Double Correlation Of Money And Barter

02.11.2021
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The Double Correlation Of Money And Barter

Money is the exchange of one thing for another. It is the result of a transaction between a buyer and a seller. Money is also referred to as money, bills, coins, currency and banknotes. Money is any tangible item or verified account which is usually accepted as payment for products and services and settlement of unpaid debts, including taxes, in a certain country or socio economic context.

money

 

Money has several different forms. The most common ones are gold and currency, which are widely used around the globe, though gold tends to be the favourite of merchants. There is also barter, which is the process of bartering where one party exchanges one commodity for another. In this case, commodities are usually bought in the place of goods that have a high value. For example, if you want to buy a new car with cash, you would go to a cashier who will give you an account of the amount of money that he has available for trading.

 

Money is often referred to as ‘commodity money’, because it facilitates the exchange of goods between individuals. Money facilitates trade by allowing individuals to buy goods from other individuals at a price that both parties agree on. The goods are usually bought in different currencies so that the market participants can exchange their currencies for each other’s currencies. This also allows them to hedge their bets against each other. For example, when the US economy came close to defaulting on its debt obligations, all holders of US debt were forced to sell US bonds in the open market to cover the defaulted debt obligation.

 

Money may be defined as a medium of exchange, since it is used in all economic activities and exchanges of products and services. Usually, money acts as a medium of exchange, since it enables the market participants to make transactions without any effort or risk. However, money is not a good medium of exchange if it is controlled by any one person or institution. On the other hand, money is defined as a good medium of exchange when it is allowed to fluctuate according to market forces.

 

Money plays a key role in all economic activities. For example, if I want to exchange my goods for cash, then I should be prepared to face some transaction costs. These transaction costs are unavoidable. This is because goods are not produced in large quantities that can be traded away at a given price; and, moreover, goods change hands more frequently than money does.

 

Let us take the most common example, that of agricultural products. In general, agricultural produce is produced for a period of three years or more before it is marketed commercially. During this period, there is a high propensity for farmers to buy existing crop supplies at low prices to sell later at higher prices. There is a corresponding high propensity for market prices to fall when the quantity of agricultural goods sold declines. It is in this context that the role of money becomes relevant.

 

The sale and purchase of agricultural products is a regular business in most economies. This is especially so in the United States. At any given time, the purchasing power of money tends to decline as a result of a decrease in aggregate demand, which is a reflection of increasing competition from other nations. If the government decided to support this trend by making loans to farmers, it would face a double coincidence of phenomena. First, it would reduce aggregate demand and second, by changing the rate of interest, it would reduce employment in the farming sector, thereby reducing aggregate demand even further.

 

By contrast, let us assume that barter transactions occur on the black market – the internal trade system of individuals who engage in exchange with each other without the intervention of a recognized money stock. In such cases, money plays no role at all. What occurs on the black market is the transfer of wealth. Why is this important? Because wealth transfer in a society based on barter exchanges, is always between individuals who have different views of what value is assigned to a dollar. Since there is no standard amount that can be exchanged for a dollar, there tends to be a degree of subjective valuation attributed to the value of money, which is why barter transactions tend to occur in a double coincidence with the practice of money exchange.

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