# From Barter to Money

## Overview

This chapter traces the journey of how people exchanged goods and services before money was invented, the limitations of the barter system, and how money emerged in different forms over time. It also explores modern transactions through paper currency and digital modes of payment, highlighting the evolving role of money in economic life.

## Key Topics Covered

### 1. The Barter System

* **Definition**: The barter system is the direct exchange of goods and services without using money.
* **How it Worked**: People traded one item for another (e.g., an eraser for a pencil).
* **Common Items Used**: Cowrie shells, salt, tea, tobacco, cloth, cattle, and seeds.

#### Example:

If someone had extra wheat but needed shoes, they would look for a person who had shoes and wanted wheat.

### 2. Limitations of Barter System

* **Double Coincidence of Wants**: Exchange could only occur if both parties needed what the other had.
* **Difficulty in Value Comparison**: It was hard to measure how much wheat was equal to a pair of shoes.
* **Indivisibility**: Some goods couldn’t be divided (e.g., an ox).
* **Portability**: It was hard to carry bulky goods for trade.
* **Durability**: Goods like food could spoil or get damaged.

#### Illustration:

A farmer with an ox trying to exchange it for shoes, medicine, and a sweater faced several challenges:

* Finding someone who wants an ox.
* Breaking the ox's value into smaller items.
* Storing perishable goods like wheat.

### 3. Traditional Barter Practices that Continue Today

* **Junbeel Mela (Assam)**: Tribal groups exchange goods like vegetables, herbs, and handmade items.
* **Book Clubs**: People exchange books they’ve read for new ones.
* **Clothes-for-Utensils Exchange**: Vendors give household items in return for old clothes.


## 4. Functions and Features of Money

Money was developed to overcome the difficulties of the barter system. It serves the following basic functions:

* **Medium of Exchange**: Used to buy goods and services.
* **Store of Value**: Can be saved and used later.
* **Standard of Deferred Payment**: Payments can be made later using money.
* **Measure of Value**: Compares the value of different goods and services easily.

> Example: A farmer can sell wheat, receive money, and later use it to buy medicine, instead of exchanging wheat directly.

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## 5. Evolution of Money Over Time

### A. Coinage

* **Earliest Form**: Coins made of gold, silver, copper, or their alloys.
* **Used By**: Rulers issued coins with symbols (rūpas) on both sides (obverse and reverse).
* **Benefits**: Coins were durable and portable, and supported trade across regions.

#### Examples:

* Chalukya coins had Varaha (Vishnu’s avatar).
* Chola coins had tiger emblems.
* Roman coins found in Tamil Nadu show international trade links.

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### B. Paper Currency

* **Reason for Emergence**: Carrying large numbers of coins was difficult.

* **First Used**: In China; introduced in India in the late 18th century.

* **Modern Notes**: Have cultural motifs and features to aid the visually impaired.

* **Issued by**: Reserve Bank of India (RBI) is the only authority that can issue currency in India.

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### C. Digital Money and Modern Transactions

* **Digital Payments**: Money now also exists in electronic forms.
* **Used Through**:

* UPI (Unified Payments Interface)
* Debit and Credit Cards
* QR Codes
* Net Banking

#### Example:

A fruit vendor uses a QR code that customers scan to make payments digitally.

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## New Terms and Simple Definitions

| Term | Simple Definition |
| --------------------------- | --------------------------------------------- |
| Barter System | Exchanging goods without money |
| Double Coincidence of Wants | Both parties need what the other offers |
| Divisibility | Ability to split something into smaller parts |
| Portability | Easy to carry |
| Durability | Lasts long without damage |
| Currency | System of money used in a country |
| Denominations | Units of money (₹10, ₹50, etc.) |
| Minting | Making coins |
| Alloy | Mix of metals used to make coins stronger |
| QR Code | Code used to make digital payments |

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## Practice Questions

### Easy (3)

1. What is barter system?
**Ans**: It is a way of exchanging goods and services without using money.

2. Name any two commodities used in barter system.
**Ans**: Salt and cowrie shells.

3. Who issues paper currency in India?
**Ans**: Reserve Bank of India (RBI).

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### Medium (2)

4. What are the main functions of money?
**Ans**: Medium of exchange, store of value, standard of deferred payment, and measure of value.

5. Why did paper currency replace coins for larger transactions?
**Ans**: Carrying and storing a large number of coins was difficult.

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### Difficult (3)

6. Explain with an example what is meant by double coincidence of wants.
**Ans**: If a person with wheat wants shoes and another with shoes wants wheat, exchange is possible. If not, it becomes hard to trade.

7. How did coins help trade across regions in ancient India?
**Ans**: Coins from powerful rulers were accepted in other kingdoms, making trade easier across distances.

8. How is digital money different from paper money?
**Ans**: Digital money exists in electronic form and is transferred through apps or bank services without physical exchange.

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### Very Difficult (2)

9. Compare the challenges of storing wheat in the barter system with storing money today.
**Ans**: Wheat can rot or get eaten by pests, while money (especially digital) can be stored securely for long periods.

10. How did the coinage system reflect the culture and governance of a kingdom?
**Ans**: Coins had images of rulers, deities, and symbols, showing political power and cultural values (e.g., Varaha on Chalukya coins).

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