Sandeep Garg Macroeconomics Class 12 Solutions Chapter 5

Important Topics in Sandeep Garg Class 12 Macroeconomics Solutions Chapter 5

It can be said that the availability of Money determines how an economy performs. It makes trade and transactions possible in an economy. Have a look at some of the key topics you have to study from Class 12 Sandeep Garg solutions Class 12 Money chapter:

Barter System

Barter system is a traditional method of exchange. Here goods are bought in return. For example, an individual might sell 1kg of wheat in exchange for a certain amount of cotton. The value of exchanging goods is to be determined accordingly. Barter system was prevalent in earlier times but is a rare practice in today's world. 

Barter system is still practised in C-C economy or commodity for commodity economy. But this too has certain limitations. This system of exchange has been discussed in detail in the chapter of Class 12 macroeconomics Money.

Double Coincidence of Wants

Double coincidence of wants is the first requirement when it comes to the barter system. It implies a situation where both individuals are willing to exchange some form of commodities. They buy the commodity they require by selling the commodity they have; it is often called a ‘perfect barter exchange’. The second answer in Sandeep Garg Class 12 Macroeconomics Solutions Chapter 5 explains ‘Double Coincidence of Wants’.

Characteristics of Money

Money has to meet certain conditions to function as a medium of exchange in an economy. Thus, it must possess some mandatory characteristics.

There are four basic characteristics of Money. They are as follows:

• Measure of Value- Since value of all goods and services can be expressed in monetary units, money acts as a convenient unit of account. For instance- if 1 kg of rice cost rs.100 you can buy them by giving 100 units of money. 

• Medium of Exchange- This is the major advantage of money, since the barter system has become extremely difficult due to the inability to find suitable people who are ready to exchange with them for a particular commodity. With the advent of money, now people do not have to wait or look for someone for exchanges, with the help of money they can buy or sell whatever and whenever they want. 

• Weight- When compared to the goods that are exchanged in a barter system, money is very light in weight and can be easily stored. Therefore, it is used as a store of value. 

• Durability- Over a prolonged period of time, it maintains the same shape, form, and substance; it does not easily decompose, deteriorate, degrade, or otherwise change over time. 

To understand these characteristics in detail, you can refer to the Class 12 Macroeconomics Sandeep Garg Solution Chapter 5 Money.

Money Supply

Money supply can be termed as the extent of currency available in an economy. It is the total sum of credit flowing in an economy at any given point of time. The supply of Money is assessed in terms of deposits as well as liquid cash. The fourth answer in Class 12 macroeconomics Money solutions discusses money supply.

DDA

DDA or Demand Deposit Account is an account containing all such deposits which are to be converted into a liquid form (cash) through cheques or drafts. Funds can be withdrawn from DDA at any time without having to take prior permission. Demand Deposit Account is a contrast to the Term Deposit Account, where prior permission is required in order to access funds.

Bank Money

Bank money is demand deposits available with a commercial bank. Individuals deposit their earnings, income, or savings in a bank account. In turn, this Money is extended as a loan to lenders. Bank money can also be termed as commercial bank money.