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Choose the correct statement/s from the following. i. It is difficult to carry oneтАЩs wealth under a barter system of transactions. ii. Money is perishable and it cannot be stored. iii. An increase in the price level can diminish the purchasing power of currency.
i and iii
ii and iii
i and ii
Only ii
i and iii
The barter system lacks a common store of value, making it difficult to accumulate wealth due to the perishable nature of many goods. Money, however, is a durable medium that acts as a store of value; therefore, statement (ii) is incorrect because money is typically not perishable.
The barter system lacks a common store of value, making it difficult to accumulate wealth due to the perishable nature of many goods. Money, however, is a durable medium that acts as a store of value; therefore, statement (ii) is incorrect because money is typically not perishable.
If you trade 10 kilos of wheat for a cow, you cannot easily save that wealth because the wheat will eventually rot, unlike a bank balance which remains stable over time.
Purchasing┬аPowerтЙИPrice┬аLevel1тАЛ тАФ representing the inverse relationship between money value and inflation.
The purchasing power of money is inversely proportional to the price level. When the general price level (P) rises, the amount of goods that one unit of currency can command decreases, a phenomenon known as inflation.
Wealth storage is a primary function of money that barter systems fail to provide efficiently.
Inflation acts as a 'hidden tax' that erodes the real value of cash holdings.
Money functions as a store of value, medium of exchange, and unit of account.
Money facilitates complex economic transactions.
Money allows for the deferment of consumption over time.
Hyperinflation can render currency useless.
Barter systems suffer from the 'double coincidence of wants' problem.
Modern monetary policy usage by central banks.
Personal financial planning against inflationary trends.
Standard value: Purchasing power is 1 at base year prices.
Option ii is wrong because money (especially fiat currency or gold) is durable and designed precisely to be stored, unlike perishable goods such as food.
A is correct тАФ Statements (i) and (iii) accurately describe the limitations of barter and the impact of inflation, while statement (ii) is false as money is durable.
Always remember that 'Store of Value' is one of the three fundamental functions of money, making any statement claiming money is perishable incorrect in the context of economics.
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