📖 Chapter 2 of 11 · Smart Money Basic (Multi Indian Language) · Class 4–7
Chapter 1 · What is Money? (Recap)
Before we begin our new journey, let us remember a few things you have already learnt in your earlier classes. Don't worry — this is meant to feel familiar!
Long, long ago — the barter system
Many hundreds of years ago, people did not use money. If a farmer in Bihar grew rice and needed cloth, he would meet a weaver and exchange a sack of rice for a roll of cloth. This was called barter. It worked — but only sometimes. What if the weaver did not want rice? Or if a sack of rice was worth ten metres of cloth and the farmer wanted only two? Barter became difficult.
Then came money
To solve these problems, people invented money — something everyone agreed to accept in exchange for goods and services. First it was cowrie shells, then metal coins, then paper notes, and today even invisible digital money on our phones!
Key Word
Money is anything that people agree to accept in exchange for things they need.
What does money do for us?
Money has three important jobs:
1. A way to buy things. When you pay ₹20 for an ice cream, money has helped you exchange your effort (or your parent's effort) for that ice cream.
2. A way to measure value. A pen costs ₹10, a school bag costs ₹500. Money lets us compare how much different things are worth.
3. A way to save for tomorrow. You can keep some money safe today and use it next month, or even next year. This is called saving.
Fun Fact!
The word “rupee” comes from the Sanskrit word “rupya”, which means a piece of silver! India's first rupee coin was issued by Sher Shah Suri way back in the 1540s.
Solved Examples
Think first, then read the answer!
1. Asha exchanged 5 kg of rice with her neighbour for 2 metres of cloth. If 1 kg of rice costs ₹40 and 1 metre of cloth costs ₹100, did Asha
Show answer
Answer: Value of 5 kg rice = 5 × ₹40 = ₹200. Value of 2 m cloth = 2 × ₹100 = ₹200. Asha gave goods worth ₹200 and received goods worth ₹200. Yes — both sides are equal in value, so it was a fair barter.
2. Ravi has one ₹500 note, three ₹100 notes, two ₹20 notes and four ₹2 coins. How much money does Ravi have in total?
Show answer
Answer: ₹500 × 1 = ₹500; ₹100 × 3 = ₹300; ₹20 × 2 = ₹40; ₹2 × 4 = ₹8. Add them: ₹500 + ₹300 + ₹40 + ₹8 = ₹848. Ravi has ₹848.
3. A pencil costs ₹5, a notebook ₹25, a pen ₹10. How many pencils equal one notebook? How many pens?
Show answer
Answer: Pencils: ₹25 ÷ ₹5 = 5 pencils. Pens: ₹25 ÷ ₹10 = 2.5 pens — but pens cannot be split, so you need 3 pens (₹30) to match one notebook in value.
4. Why is money better than barter? Give two reasons.
Show answer
Answer: Money is accepted by everyone, so you do not have to find a person who wants exactly what you have. And money has fixed values (₹10, ₹100, ₹500), so it is easy to compare prices.
Check Your Understanding
Do these in your notebook. Ask an elder if you get stuck!
Q1. In your own words, explain what the barter system was. Give one example.
Q2. List the three main jobs of money.
Q3. Manju has two ₹50 notes, three ₹20 notes and five ₹1 coins. How much money does she have?
Q4. If a kilogram of mangoes costs ₹60 and you give the shopkeeper a ₹100 note, how much change should you get back?
Q5. Name any two things money cannot buy. Discuss with a friend.
Q6. Match: (a) Rupee (b) Barter (c) Savings with (i) Old form of trade (ii) Currency of India (iii) Keeping money for the future.
Check your understanding — Chapter 1
Tap an answer to check it instantly. These are for practice — nothing is saved or sent.
Q1. What was the barter system?
- Trading goods for goods, before money existed
- Paying with coins only
- Saving money in a bank
Show answer
A. Trading goods for goods, before money existed
Q2. Which of these is NOT a job of money?
- A way to buy things
- A way to measure value
- A way to make plants grow
Show answer
C. A way to make plants grow
Q3. The word “rupee” comes from a word meaning —
- a piece of gold
- a piece of silver
- a paper note
Show answer
B. a piece of silver
✎ Activity
With your teacher's help, draw a poster titled “My Money Story”. Show how a coin travels from your hand to a shopkeeper, then to a farmer, then to a school. Money keeps moving — that is what makes an economy!