Question

Reena a bought a house. While valuing her house, her grandmother valued it in terms of buffalo and carts.

What is the problem that is being faced in the valuation process?

(a) Lack of double coincidence of wants

(b) Lack of store of value

(c) Absence of a common unit of value

(d) Lack of standard for deferred payment

Answer 1

(c) Absence of common unit of value. One encounters this problem in a barter system of exchange. A monetary system of exchange offers a common unit of value (money). Accordingly, this problem ceases to exist in a monetary system of exchange.