Most of the candidates were attracted to this question. The general performance was above average. Many candidates showed a good understanding of the barter system and its problems in the (a) part, but only few of them could adequately explain how the introduction of money has solved the problems associated with the barter system in (b) part.

Candidates needed to provide the following answers to score good marks in this question.

(a) (i) double coincidence of wants;
(ii) determining the exchange rate among goods;
(iii) barter economy also faced the problem of indivisibility i.e. where one party to the exchange has an indivisible item such as sheep;
(iv) some goods to be exchanged were not easily portable;
(v) there was problem of saving commodities for future use;
the problem of borrowing and buying on credit;
lack of specialization and division of labour.

(b) (i) as a medium of exchange it breaks transactions into sale and purchase thus there is no need for double coincidence of wants;
(ii) as a unit of account it allows rate of exchange to be easily determined;
(iii) modern money has several units and facilities exchange in small and large units;
(iv) modern money is easy to carry about to facilitate easy transactions;
(v) as a store of value people with surplus goods convert them into money and save until the money is needed;
money as a standard of deferred payments allows borrowing and buying on credit;
money as a store of value and medium of exchange allows specialization and division of labour.