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BARTER SYSTEM AND CURRENCY :

BARTER SYSTEM •	Barter System: A barter system is an old method of exchange. In this People exchanged services and goods for other services and goods in return. In ancient times, this system involved people in the same area. The value of bartering items can be negotiated with the other party. Bartering doesn't involve money.

•	History of Bartering: The history of bartering dates all the way back to 6000 BC. It was introduced by Mesopotamia tribes. Bartering was adopted by Phoenicians. Phoenicians bartered goods to those located in various other cities across oceans. Goods were exchanged for food, tea, weapons, and spices. Salt was popular item exchanged. When money was invented, bartering did not end, it become more organized. Due to lack of money, bartering became popular in the 1930s. It was done through groups or between people who acted similar to banks. If any items were sold, the owner would receive credit and the buyer's account would be debited.

•	Advantages of Barter System: 1.	It’s the simplest system of trade which involves no complications. 2.	Since no money is involved people will produce and consume only what they want and there is no under or over production and also there is no question of people hoarding the commodities. 3.	Problem of foreign exchange and international trade does not arise and also there is less possibility of concentration of wealth in the hands of few people. 4.	Personal and natural resources are ideally utilized to meet the needs of the society

•	Disadvantages of Barter System: 1.	It requires double coincidence of want. for example if you are wheat producer and you want apple but the apple producer does not want to buy wheat rather he or she wants rice then you will have to go to rice producer first and buy rice from him or her and then you can buy apple in exchange of rice. Hence barter system leads to a lot of wastage of time in finding the other party and numerous exchanges in order to do a trade. 2.	Since all people keep produce in physical form as there is no store of value there are many practical problems associated with storage of goods, transportation of goods, and wastage of goods. 3.	big product cannot be divided into small products so for example if the cow owner wants to purchase 1 bag of wheat but wheat owner is giving 5 bags of wheat in exchange of 1 cow, now cow owner cannot cut cow into 5 pieces and hence this problem can be solved only if there is medium of exchange present which in modern economic system is money. 4.	It may create controversy regarding the quality of goods or services to be repaid in future. 5.	Both parties run the risk that the goods to be repaid may increase or decrease in value over the period of contract. 6.	Another difficulty of barter system is that goods and services cannot be transported conveniently from one place to another.

CURRENCY •	History: The word ‘rupee’ has been derived from the Sanskrit word rupyakam, meaning a silver coin. It owes its origin to rupiya, issued by Sher Shah Suri in 1540-45. It remained in use during the Mughal period, Maratha era and British India. Earliest paper rupees issued by Bank of Hindostan (1770– 1832), General Bank of Bengal and Bihar (1773–75), and Bengal Bank (1784–91). On 1 Apr 1935, Reserve Bank of India was set up. •	Reserve Bank of India: The Reserve Bank of India (RBI) is India's central banking institution, which controls the monetary policy of the Indian rupee. It commenced its operations on 1 April 1935 during the British Rule in accordance with the provisions of the Reserve Bank of India Act, 1934. The RBI plays an important part in the Development Strategy of the Government of India. The Central Board of Directors is the main committee of the Central Bank. The Government of India appoints the directors for a 4-year term. The Board consists of a Governor, and not more than 4 Deputy Governors.