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Concept of the Extra Credit in Trade Essay


Trade is one of the activities among humans that have led to the development of better qualities of life because people can access different commodities that make life simpler. Trade in its traditional form involved a barter system, where people would exchange commodities in rations that justified the exchange for each commodity (Young 265). The introduction of money in trade was an innovative way to give a common value to products, and to use currency as a quantifier of the value of various commodities. Since the introduction of money, the concept of purchasing power emerged. Purchasing power refers to the ability of an individual to possess a given quantity of commodities, based on the amount of money that they have in cash. Money has been given value based on the number of items that a unit of a currency can purchase. However, money in itself does not solve the trading needs of the people in the contemporary world.

It is apparent that an increase in international trade activities has led to the development of the need to reduce the use of money in cash. This is primarily because money does not offer a viable way to trade because it is bulky. For instance, if one needs to buy a shipment worth of product from China to the United States, they would be compelled to carry a lot of money in cash, probably in several bags. This is not a feasible way to trade; hence, there has been the introduction of checks and bank notes that have the same value as the money that would be used to facilitate an exchange of a commodity.

The main advantage of using the alternatives to money is that a blank check can be given any value that an individual wants to use (Young 268). Checks and other options eliminate the need to carry bulky luggage of money when making a big trade. They also eliminate the risk of losing money because the exchange of money takes place through the bank accounts of the associated traders. Additionally, it is apparent that the individuals making payments can delay the time that the money will be wired to the seller, which makes it possible to receive the goods and services and evaluate them before the payment is made. The maturity period of the alternatives to money gives the buyer a guarantee that they can halt the payment if the seller fails to deliver the products. This is particularly important when trading with unknown sellers.

As the world shifts from using paper money, the rise of a digital payment era will lead to the development of simpler options to make payments. For instance, the use of a credit card makes it unnecessary for people to move around without carrying large amounts of money for their daily activities. However, there are various disadvantages of using the current alternatives to money. For instance, the issue of identity theft has led to the development of challenges when using credit cards. Cyber criminals can easily steal people’s financial information and access their money from the banks and other financial institutions. Moreover, it is quite easy to misplace the cards and this would lead to other issues when one cannot access their money during emergencies. Mobile money transfer is one of the emerging trends in payments, and it might result in more efficient and safer ways of making payments in business.

Work Cited

Young, Allyn Abbott. “The Mystery of Money: How Modern Methods of Making Payments Economize the Use of Money. The Role of Checks and Bank-notes. The Enormous Edifice of Credit.” The Book of Popular Science. The Grolier Society, 1924, 265-321.

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IvyPanda. (2020, September 10). Concept of the Extra Credit in Trade. Retrieved from https://ivypanda.com/essays/concept-of-the-extra-credit-in-trade/

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"Concept of the Extra Credit in Trade." IvyPanda, 10 Sept. 2020, ivypanda.com/essays/concept-of-the-extra-credit-in-trade/.

1. IvyPanda. "Concept of the Extra Credit in Trade." September 10, 2020. https://ivypanda.com/essays/concept-of-the-extra-credit-in-trade/.


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IvyPanda. "Concept of the Extra Credit in Trade." September 10, 2020. https://ivypanda.com/essays/concept-of-the-extra-credit-in-trade/.

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IvyPanda. 2020. "Concept of the Extra Credit in Trade." September 10, 2020. https://ivypanda.com/essays/concept-of-the-extra-credit-in-trade/.

References

IvyPanda. (2020) 'Concept of the Extra Credit in Trade'. 10 September.

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