The role of money in a less developed country

Abstract

The introduction of money in a barter economy is regarded as a very important phenomenon for several reasons. In a barter economy, goods are usually exchanged against goods. But to facilitate exchanges of goods among their producers, it is necessary to have ‘a double coincidence of wants’. For instance, a man from the plains may wish to exchange some cloth against some wood; if a man from the hills brings some wood which he wants to exchange against cloth in a common market at a mutually agreeable time and if the amount of cloth and wood to be exchanged are acceptable to both the parties, then exchange would take place. Such a barter system may operate in many villages of less developed countries (LDCs). But the defects of such a system are well known