Question

Explain difficulty in storing wealth problem faced in the barter system of exchange

Answer 1

Difficulty in storing wealth: People keep their wealth in the form of money because money is the most liquid form of wealth. Savings in the form of money is maintained for purchasing commodities in the future. In this case, the values of commodities are being stored. Hence, money acts as a store of value. However, the store of value is completely absent under the barter system Wealth is stored in terms of goods as there was no money in existence. There were many problems such as storage of goods cost, loss of value and movement of transfer. For example, wheat and rice do not possess durability i.e. their quality deteriorates with the passage of time. Storage of good requires time and efforts. Hence, it is not practically possible to store people’s purchasing power.