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Questions and Answers
What is the most serious problem in barter system?
What is the most serious problem in barter system?
- Lack of store of value
- Lack of double coincidence of wants (correct)
- Problem of future payments
- Absence of common unit of measure
Why does the absence of a common unit of measure pose a problem in the barter system?
Why does the absence of a common unit of measure pose a problem in the barter system?
- Values of different goods and services cannot be compared (correct)
- It leads to constant value of each commodity in the market
- It affects future payments for any contracts
- It makes storing wealth more difficult
How does the lack of store of value impact the barter system?
How does the lack of store of value impact the barter system?
- It increases the overall wealth in the system
- It leads to easy storage of wealth
- Stored commodities may lose value over time (correct)
- It simplifies future payments for contracts
What is a disadvantage of the barter system regarding future payments?
What is a disadvantage of the barter system regarding future payments?
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How can the lack of double coincidence of wants be explained?
How can the lack of double coincidence of wants be explained?
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Study Notes
Barter System Limitations
- The most serious problem in the barter system is the absence of a common unit of measure, which makes it difficult to determine the value of goods and services.
Lack of Store of Value
- In a barter system, there is no store of value, making it challenging to save for the future or make long-term plans.
Future Payments
- A major disadvantage of the barter system is the difficulty in making future payments, as it relies on the simultaneous fulfillment of wants and needs.
Double Coincidence of Wants
- The lack of double coincidence of wants occurs when two parties do not have what the other wants at the same time, making it hard to facilitate exchange in a barter system.
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Description
Explore the difficulties associated with the barter system, such as the lack of double coincidence of wants, absence of a common unit of measure for value, and the lack of a reliable store of value. Understand the limitations that led to the development of modern currency and trade systems.
