Question

The makings of a good currency Instead of using money, people could simply barter one good for another. Which of the following is true of this type of exchange?
A. It lowers the transaction cost of exchange.
B. It requires a double coincidence of wants.
C. It enables people to get more of the goods they want in exchange for the goods they have.

Answer 1

Answer: B. It requires a double coincidence of wants.

Explanation:

Barter trading works by exchanging a good or service with another person who then gives you another good or service. For this to work both parties need to want the goods they are exchanging. This is called a ''double coincidence of wants''.

Barter trading cannot happen without it because if for instance you have a good or service that the other party does not want, they will not trade. For instance, you want to trade a cow for building materials but the man selling the building materials wants 3 sheep instead and so will not trade.

It makes this system very inefficient and cumbersome.