VERY URGENT! PLEASE HELP IN ECONOMICS QUESTION

[arvind0708]

Discuss how the operation of a barter economy might be affected by introduction of money.

Please can anyone tell me what to write.Your help would be greatly appreciated!.

 

[arvind0708]

Analyse why the aim of government policy might conflict with each other and discuss which of aims ought to be given priority.

What to write and if possible give me a site to get notes on govt policy and conflict.

 

[Shahnam]

FOR QUESTION NO.1
Barter system needs co-incidence of wants, its main problems are: divisibility, storage, valuation of assets, transportation.
Money would help in quicker transactions as it is a LEGAL TENDER, easy to carry. It is generally acceptable thus proper transactions can be made. "it is measure of value" thus to value the commodity against money is now more justified and value for money can be bought. "Money has property of being easy to divide" therefore the commodities ranging from mere cents to billions of pounds can be bought much easily.
"Money is store of value" therefore the money can be saved and later on much expensive items can be bought which would have not been quite possible in barter system as the storage was a problem. The goods would get rotten or even go bad.

 

[Shahnam]

FOR QUESTION NO. 2
the government policy is to have low and stable rate of inflation, economic growth, and low unemployment rate. The conflict would rise when the government would want to achieve a high economic growth rate, which is measured in GDP, through increased productivity and increased trade. However, to achieve this high rate it would employ more capital resources, e.g. machinery, in order to increase productivity. This would although increase the output, efficiency, and hence GDP but at cost of high unemployed labor.
Similarly, if the government wants to decrease the inflation rate it would use the contractionary fiscal policy in which it reduces the expenditure in public sector together with increasing the taxes to decrease the disposable income with masses. Thus, the aggregate demand would fall. Labor have derived demand would also face the decline in its demand. There would be CYCLICAL unemployment.
Also, in a situation where the economy faces high unemployment the government would like to reduce it through increasing the demand for the goods - demand side policy. However, as this happens people would have jobs which would earn them more income. The velocity of circulation of money would rise and hence would the inflation rate.
All three situations above show the conflicts in the government policy if not properly planned and managed.

Aims which should be given priority should be economic growth but together should other things like NAIRU, low unemployment should be maintained. The labor should be made skilled and gradually the shift towards more value added goods, increased specialization, controlled disposable incomes, more planned economic cycles with the timely implementation of extension policies in near-to recession cases.