Question

2. Which of the following statements about money are correct?

Answer 1

Answer:

A.(1) and (2) only

Explanation:

Which of the following statements about money are correct?

(1) With the use of money, double coincidence of wants is not necessary in an exchange.

(2) With the use of money, the cost of looking for trading partners can be lowered.

Answer 2

Answer:

The statements that are correct about money are

(1) With the use of money, double coincidence of wants is not necessary in an exchange.

(2) With the use of money, the cost of looking for trading partners can be lowered.

Option: (A)

Explanation:

The concept of using money having a predefined value emerged from the idea of how convenient it would be to have a common commodity of exchange that could be used in exchange for anything and everything offered for sale. After the barter system eventually came to an end, the process of determining monetary values of commodities of day to day use began and inveterated gradually. As the prevalence of the use of common money grew, the necessity of double coincidence of wants ended soon. People who wanted to exchange wheat for maize no longer had to wait to come across someone who wanted to exchange maize for wheat.

With the introduction of money and an increase in its use, the time and efforts required to find a partner to trade with decreased dramatically. This made transactions more convenient and affordable and more people began to involve themselves in trading activities. The use of money not only dispensed ease of doing business but also helped in establishing faith and reliability among trading partners.