The nature of Exchange System at Different Stages of Economy:

1. A system of exchange has always existed at every stage of the economy. In primitive societies, people changed things for their utility. It was called the barter system. There was no money nor was there any measure to determine the value of things.

2. The modern economy is essentially a market economy in which exchange is a prime institution. People now produce for the market and every commodity has a value in terms of money and the currency is the medium of exchange.

3. Even agriculture is no longer a mere subsistence economy as it was during the pre-industrial period. The agricultural production has value in market terms and the farmer produces surpluses for the market with a profit motive.

4. The money is not only in the form of metal coins as in the earlier times but paper money has become a more prominent form of money (or currency). The coins are used only as small changes.

5. At a very advanced stage of the industrial economy where we have already reached now, even money has become a secondary means of exchange. Most of business at a higher level is transacted on credit. The economy is so advanced and transactions have become so huge and complex that no amount of hard money would be able to meet the demand. Moreover, the exchange on the basis of credit in very safe, quick and convenient.