The development of money solved many of the problems inherent in the barter system. Explain TWO specific functions of…

Year	2026	Total
Questions	20	20

Year

2026

Total

Questions

Solution & Explanation

Core Logic

Money serves several economic functions that directly counteract barter flaws:

Function: A medium of exchange.

Resolution: It makes barter completely unnecessary. Buyers and sellers no longer need to find a 'double coincidence of wants'; a seller accepts money and can spend it on anything else.

Function: A measure of value.

Resolution: It solves the barter problem of establishing complex exchange rates between every possible item. Money provides a universal price tag for all goods.

Function: A store of value.

Resolution: Solves the barter issue of storing wealth. Perishable bartered goods rot, but money can be saved indefinitely for future use.

Evaluation Rubric / Model Answer

Candidates must clearly pair TWO functions with their respective solutions:

Medium of exchange $arrow$ $\rightarrow$ Solves the double coincidence of wants.
Measure of value $arrow$ $\rightarrow$ Solves the difficulty of determining exchange rates.
Store of value $arrow$ $\rightarrow$ Solves the perishability/inability to store wealth over time.

Chapter Mix

Class 10 Business: Background To Business

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Q csec_pob_2026_15_january_morning The Development Of Barter

Which of the following terms best describes an economic system where individuals produce just enough to survive without creating a surplus to improve their way of life?

A. Mixed economy
B. Subsistence economy
C. Capitalist economy
D. Barter economy

Solution

Core Logic

Early people had a simple way of life, meeting all their basic needs themselves without the facility of money, a process known as direct production. In doing so, they provided just enough to survive but not to improve their way of life, which categorizes their environment as a subsistence economy.

Step 1: Final Conclusion

The condition of producing merely enough for survival without excess is defined as a subsistence economy.

Pattern Recognition

Keyword matching: 'Just enough to survive' directly maps to 'subsistence economy'. A surplus is required to move beyond subsistence into trade.

Chapter Mix

Class 10 Business: Background To Business

Q csec_pob_2026_15_january_morning The Development Of Barter

A farmer wishes to trade his surplus cabbage for chickens. However, he struggles to find a chicken owner who wants his cabbage. Which primary disadvantage of the barter system does this scenario illustrate?

A. Divisibility of goods
B. Storage of wealth
C. Double coincidence of wants
D. Absence of an exchange rate

Solution

Core Logic

The barter system relies on exchanging one good for another. A major limitation is the 'double coincidence of wants', meaning individuals must not only find someone with the surplus they desire but that person must also want what the first individual is offering in return.

Step 1: Final Conclusion

The scenario perfectly describes the failure to achieve a double coincidence of wants.

Pattern Recognition

When two parties must simultaneously desire each other's specific goods for a trade to occur, it defines the 'double coincidence of wants'.

Chapter Mix

Class 10 Business: Background To Business

Q csec_pob_2026_15_january_morning The Role Of Money

Which of the following functions of money allows an individual to earn income at one point in time but spend it securely at a later date?

A. A standard for postponed payment
B. A medium of exchange
C. A measure of value
D. A store of value

Solution

Core Logic

Money has four main functions. The function that allows money to be saved (unlike many perishable goods which cannot be saved for long) is its role as a 'store of value'. Note that while 'standard for postponed payment' relates to earning and spending at different times, the specific ability to 'save' it securely refers to its store of value.

Step 1: Final Conclusion

The ability to save money for future use characterizes it as a store of value.

Pattern Recognition

Saving for the future = Store of value. Earning now to pay a debt later = Standard for postponed payment.

Chapter Mix

Class 10 Business: Background To Business

Q csec_pob_2026_15_january_morning Instruments Of Exchange

Which of the following instruments is most commonly used in the settlement of international debts, allowing an importer to obtain credit while enabling the exporter to sell the instrument at a discount before the maturity date?

A. Documentary credit
B. Bank draft
C. Bill of exchange
D. Telegraphic money transfer

Solution

Core Logic

A bill of exchange is primarily used in international trade to settle debts. It allows the buyer (importer) to obtain credit and pay at a future date. Simultaneously, the seller (exporter) can sell the bill at a discount to obtain funds immediately or use it as collateral for a bank loan.

Step 1: Final Conclusion

The instrument that offers credit to the importer and can be discounted by the exporter is the Bill of Exchange.

Pattern Recognition

International debt + Importer gets credit + Exporter can sell at discount = Bill of Exchange.

Chapter Mix

Class 10 Business: Background To Business

Q4 csec_pob_2026_15_january_morning The Role Of Money

For an item to be accepted as money, it must possess standardized physical appearance so that all notes or coins of a particular value look the same. Which characteristic of money does this describe?

A. Durable
B. Homogenous
C. Divisible
D. Portable

Solution

Core Logic

The characteristics of money require it to be durable, acceptable, exchangeable, divisible, scarce, portable, and homogenous. The property that ensures there is a standardized appearance for all notes of a particular value (e.g., all \$10 notes look exactly the same) is 'homogenous'.

Step 1: Final Conclusion

Standardized appearance equates to the characteristic of being homogenous.

Pattern Recognition

Standardized/Identical appearance = Homogenous.

Chapter Mix

Class 10 Business: Background To Business

The development of money solved many of the problems inherent in the barter system. Explain TWO specific functions of money and state how each resolves a major disadvantage of barter.

Solution & Explanation

Core Logic

Evaluation Rubric / Model Answer

Chapter Mix

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