Question

In: Economics

1. The medium of exchange function of money​ eliminates: A. the opportunity cost of holding money....

1. The medium of exchange function of money​ eliminates:

A.

the opportunity cost of holding money.

B.

​barter, or the exchange of goods for goods.

C.

the need for chequing accounts.

D.

the need for currency.

2. Barter requires the existence​ of:

A.

the backing of the government.

B.

the double coincidence of wants.

C.

paper currency and coins.

D.

gold or silver.

Solutions

Expert Solution

1) B.) barter, or the exchange of goods for goods.
Explanation: The medium of exchange function of money​ eliminates: barter, or the exchange of goods for goods. The exchange function of money makes it able to eliminate the barter system, as it promotes efficiency of an economy by minimizing time spent in exchange of goods and services. It enables for smooth processing of buying and seling of commodities on a monetary basis. It promotes specialization and trade by efficient division of labour and productive efficiency. It also eliminates the double coincidence of wants.

2) B.) the double coincidence of wants.
Explanation: Barter requires the existence​ of the double coincidence of wants. Barter system is a medium of exchange of goods and services with another goods and services directly without any medium of exchange. Now, the double coincidence of wants refers to the system wherein the needs of any two parties should be complemented for the exchange to take place. Meaning the goods required & wanted by one party is exchanged with goods required & needed by another party. In this both the parties agree for selling and buying each other goods.


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