Almost all things used by man have a monetary value. Wages, the pay for labour and services, taxes and duties, a family's monthly income, expenditure and savings, and even the budgets of a country or states are all framed in terms of money. This chapter traces the evolution of money – from barter to electronic transactions – and explains the role of the Reserve Bank of India, foreign exchange, the functions of money and the forms of credit.
1. Barter System
- Man has not always used money. Ancient man hunted and gathered food, later invented fire, practised agriculture, built mud houses and made earthenware.
- When there was a surplus in agricultural produce or articles like earthenware, people exchanged it with those who needed them – for example, excess food stuff for pots, or one grain for a different crop of another region.
- The articles exchanged through the barter system can be termed the first form of trade.
- Barter flourished wherever civilizations thrived – within and among civilizations. This was the initial form of international trade.
- In archaeological excavations in Egypt and Iraq (Mesopotamia), articles used during the Indus valley civilization were found.