Chapter 2: Money – Key Vocabulary

A set of vocabulary flashcards summarizing essential concepts from Chapter 2 on Money, focusing on the barter system, its limitations, and the revolutionary role of money.

Money

A universally accepted medium of exchange created to overcome the difficulties of the barter system and facilitate buying and selling of goods and services.

Barter System

A system of exchange where goods are traded directly for other goods without the use of money.

Double Coincidence of Wants

The condition in barter where each party must possess exactly what the other desires, making exchange difficult when this match does not occur.

Lack of Common Measure of Value

A drawback of barter in which no standard unit exists to compare the worth of different commodities (e.g., how many kilograms of rice equal one cow).

Crowther’s View on Money

Economist Geoffrey Crowther likened the importance of money in economic life to the discovery of fire in science and the invention of the wheel in mechanics.

Difficulties of the Barter System

Collective problems—such as lack of double coincidence of wants, absence of a common measure of value, indivisibility of certain goods, and difficulties in storing wealth—that prompted the development of money.