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From Barter to Money Understanding Money’s Evolution in Society Class 7 Free Notes and Mind Map (Free PDF Download)

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barter

1. Introduction

Money is something we use in our daily life. Earlier people used to exchange goods and services through a system called barter. Imagine giving your wheat to get shoes – that’s barter! The way we trade and exchange things has changed a lot because of money. The famous economist John Maynard Keynes said that money is what connects our present to our future.

In these notes, we will study how the barter system worked, why people felt the need for money, and how money has evolved over time. Understanding this journey will help you see the imp role money plays in our everyday lives.

2. The Barter System

Barter system is when people directly exchange goods or services without using money. This was the earliest form of trading that existed all over the world for many centuries.

People used to trade various commodities like:

For example, if you have an extra eraser and your friend has an extra pencil, you both can exchange these items – that’s barter!

Even today, some places still practice barter. In India, the Junbeel Mela in Assam is a good example where tribal communities come together to exchange herbs, spices, and rice cakes. In our homes too, we sometimes exchange old clothes for new utensils or swap books with friends.

But this system had many challenges which eventually led to the need for money.

3. Why Do We Need Money?

The barter system had several limitations that made trading difficult and inefficient:

Double Coincidence of Wants:

Lack of Common Standard Measure of Value:

Problem of Divisibility:

Problem of Portability:

Problem of Durability:

Money solved these problems by acting as a common medium of exchange. With money, the farmer could sell his ox and use that money to buy shoes, sweaters, or medicines easily.

4. Basic Functions of Money

Money makes trade simpler by overcoming the limitations of barter. It has several imp functions:

Medium of Exchange:

Store of Value:

Common Denomination:

Standard of Deferred Payment:

These functions of money have made trade faster, fairer, and more convenient for everyone.

5. The Journey of Money

Money has evolved over time to meet growing trade needs and technological advances:

Early Forms of Money

Various regions used different things as money:

Coinage

Coins were among the earliest forms of standardized money:

Paper Currency

Digital Money

6. Money’s Role in Trade and Society

Money has played a crucial role in developing trade and society:

Questions and Answers

How does the barter system take place and what kinds of commodities were used for exchange under the system?

The barter system happens when people exchange things directly without using money. For example, if you have an extra eraser and your classmate has an extra pencil, you both can swap these items – this is barter!

Different commodities used in barter included:

We can still see barter happening today in places like the Junbeel Mela in Assam, where tribal communities come together to trade local products. Even in our daily lives, we sometimes practice barter when we exchange old clothes for new utensils or swap books with friends for new stories to read.

What were the limitations of the barter system?

The barter system had many problems that made it difficult to use:

Double Coincidence of Wants:

Lack of Common Standard Measure of Value:

Problem of Divisibility:

Problem of Portability:

Problem of Durability:

These limitations showed why people needed something better – which became money!

What were the salient features of ancient Indian coins?

Ancient Indian coins called kārshāpanas or panas had many interesting features:

These coins were not just tools for trade but also symbols of cultural and political identity.

How has money as a medium of exchange transformed over time?

Money has changed dramatically throughout history:

Early Forms:

Coins:

Paper Currency:

Digital Money:

This transformation shows how money adapts to society’s changing needs and technology.

What steps might have been taken in ancient times so that Indian coins could become the medium of exchange across countries?

For Indian coins to be accepted internationally in ancient times, several steps were probably taken:

The discovery of Roman coins in India shows that Indian goods were highly valued, creating trade that favored India and spread our coins internationally.

Read the following lines from the Arthaśhāstra. “An annual salary of 60 panas could be substituted by an adhaka of grain per day, enough for four meals…” (One adhaka is equal to about 3 kg) What does this indicate about the value of one pana? The fine for failing to help a neighbour was 100 panas. Compare this with the annual salary. What conclusion can you draw about the human values being encouraged through this?

Looking at the Arthaśhāstra text:

Value of one pana:

The fine comparison:

Human values being encouraged:

This shows ancient Indian society put great emphasis on community bonds and mutual support, making it a core value enforced through severe penalties.

The RBI is the only legal source that prints and distributes paper currency in India. To prevent illegal printing of notes and their misuse, the RBI has introduced many security features. Find out what some of these measures are and discuss them in class.

Security Features in Indian Currency

The Reserve Bank of India (RBI) has implemented several security features to protect our currency:

Watermarks:

Microlettering:

Security Thread:

Intaglio Printing:

Color-shifting Ink:

Optically Variable Ink:

Unique Serial Numbers:

Fluorescent Features:

These features work together to make our currency secure and trustworthy for daily use.

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