In order to obtain a commodity, we have to give something in return. That is, we have to pay some consideration in money or money’s worth. This process is called an exchange. There can be two types of exchanges – money exchange and barter exchange. In early days, barter exchange was prevalent. Money as a medium of exchange came much later when people saw deficiencies in the system of barter exchange. For example, consider a person with excess rice in hand and who wants to exchange it for some clothes. Now searching a person who has surplus clothing and who wants to exchange it for rice only is very difficult. The search costs become restrictive as the number of individuals increase. Thus, to avoid such a problem, an intermediate good is necessary which is acceptable to both parties. Such a good is called money.

Which of following can act as store of value? i. money ii. gold, iii. landed property and houses iv. bonds

i i, ii i, ii, iii, iv iv

i, ii, iii, iv

Any asset other than money can also act as a store of value, e.g. gold, landed property, houses or even bonds. However, they may not be easily convertible to other commodities and do not have universal acceptability.