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Money Banking and Financial Markets - Assignment Example

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The following assignment entitled "Money Banking and Financial Markets" deals with different economic issues. As the author puts it, the Barter system that was earlier popular in world economy involved the exchange of goods and products for goods and products…
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Money Banking and Financial Markets
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Download file to see previous pages Moreover, sub-division of goods was necessary without which the barter system could not take place (Suri, Budhiraja and Rajput 2005). Some of the other problems associated with barter system were in storing the materials that would be used for exchange. Since they were in material forms, they required enough spaces, for example, materials like rice, grains, etc. Facilities of credit could not be made available in this system. Also, difficulty was faced in transferring the goods and products from one place to another (Suri, Budhiraja and Rajput 2005). In a barter system, even when the number of commodities would be few, the exchange rates for different products and goods became burdensome (Thomas 2005). The establishment of the monetary system has improved upon the barter system owing to different reasons. The barter system has proved to be a system that caused inconvenience for the reasons mentioned above. With all its associated difficulties, the scope and scale of trade became limited with the use of a barter system. The monetary economy eliminated such difficulties. Money could be used for the purchase of products where the value of the goods could be measured and monetary payments done accordingly. In the monetary system, thus goods are exchanged with money. Researchers opined that with the monetary system replacing the barter economy, the feudalistic economic system could be converted into a more active and definite profit-making economic system. Thus the scale of trade started increasing drastically within almost a period of two decades where a large number of individuals and groups could take part in commercialization (Karimzadi 2012).
The conversion from the barter economy to the monetary economy has proved to improve the economy of the world significantly. With the new system, the economy of the world could be seen to specialize with higher levels of labor divisions as well. While in the barter system only tangible assets could be used for the economy; in the monetary economy, money could be included in the list of assets of any individual. Thus savings is possible to be achieved more in the monetary economic system, where investments can be made with the money depending on need and time. With the monetary economy in place, problems with consumption and distribution have been found to be solved, leading to better investment measures in the economy as well (Kolars et al 2013). Thus it can be said that the establishment of a monetary economy has improved upon the previous barter economy. Considering the introduction of money in the economic system of the world, all forms of money are actually incorporated. This money could be in the form of anything, any goods or products having some intrinsic value, or that which might not have any intrinsic value (Karimzadi 2012). Money does not possess any inherent value of its own. It is valuable because people are in need, while its supply is limited. Goods and products are the most essential factors in the economy. Money is essential as it allows to purchase or sell such needed goods and products. However, the value of money gets affected or influenced depending on factors like inflation that severely affects trade and business activities and people tend to react badly in such situations. Increase in supply of money leads to conditions like inflation in an economy, resulting to increase in prices of goods and products. Hence, essentially the value of money is determined by the beliefs and reactions of people who are dependent on it (Moffatt 2013). ...Download file to see next pagesRead More
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