Chapter-Chapter 3. Money and Credit Economics class 10 in english Medium CBSE Notes

Chapter 3. Money and Credit

In ancient times, people exchanged goods through the barter system. However, this system created several difficulties because both parties had to agree to exchange the goods they possessed. To overcome these problems, money was introduced as a medium of exchange. Today, money has become an essential part of every economic activity.

Part 1 – Money and Its Functions

This section explains the barter system, the need for money, functions of money, and the different forms of modern money.

Barter System

The barter system is a method of exchanging goods and services without using money.

• Goods were exchanged directly for other goods.
• It was the earliest form of trade.
• No money was used in transactions.
• The value of goods had to be mutually accepted.
• The barter system became difficult as trade expanded.

Problems of the Barter System

The barter system had several limitations that made trade difficult.

• It required a double coincidence of wants.
• There was no common measure of value.
• Many goods could not be divided easily.
• Saving wealth was difficult.
• Large-scale trade was not possible.

Double Coincidence of Wants

Double coincidence of wants means that two persons must be willing to exchange the goods each possesses for the goods the other wants.

• Both parties must need each other's goods.
• Trade cannot take place without mutual agreement.
• Finding suitable exchange partners is difficult.
• It makes transactions slow and inconvenient.
• Money eliminates this problem.

Meaning of Money

Money is anything that is generally accepted as a medium of exchange for buying and selling goods and services.

• It is accepted by everyone.
• It simplifies buying and selling.
• It makes transactions faster.
• It removes the limitations of barter.
• It promotes trade and economic development.

Functions of Money

Money performs several important functions in an economy.

• It acts as a medium of exchange.
• It serves as a measure of value.
• It acts as a store of value.
• It helps in deferred payments.
• It facilitates domestic and international trade.

Modern Forms of Money

Today, money exists in different forms that are accepted for making payments.

• Currency notes issued by the Reserve Bank of India.
• Coins issued by the Government of India.
• Bank deposits.
• Cheques.
• Digital payment systems such as UPI, debit cards, and net banking.

Demand Deposits

Money deposited in a bank that can be withdrawn at any time is called a demand deposit.

• Depositors can withdraw money whenever required.
• Demand deposits are accepted as money.
• Payments can be made through cheques.
• They provide safety for savings.
• They promote cashless transactions.

Importance of Money

Money has made economic activities easier and more efficient.

• It encourages trade and commerce.
• It saves time and effort.
• It supports economic growth.
• It increases market efficiency.
• It improves the standard of living.

CBSE Exam Points

• The barter system required double coincidence of wants.
• Money acts as a medium of exchange.
• Demand deposits are payable on demand.
• Currency notes and bank deposits are modern forms of money.
• Money removes the limitations of the barter system.

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