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Before we used a monetary system, we used the
barter system. In this system items were traded and
the commodities' value was assessed through the process
of exchange. For example one may trade one cow for
five chickens. In this instance the cow's value is
equal to five chickens. This barter system did not
require a neutral object (i.e. money) in order to
function. Commodities were given value, based on their
exchangeability with other commodities. This was the
first way of forming value for a commodity. But the
barter system had problems and because of these
problems we progressed to the system of money. The
problem was that people depended on others having what
they needed and wanting what they had. If a man only
had a mule to barter with and he needed flour, this
meant someone needing a mule had to be willing to
trade flour, otherwise the first man couldn't get what
he needed. Due to this and other factors, we
progressed into a monetary system. This clearly shows
that money was not the simplest, meaning most basic or
first, form of valuing a commodity. |
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