Question

How does money eliminate the fundamental problems of the barter system?

Options

• By providing a common medium of exchange

• By converting all transactions into non-legal fiduciary credit

• By eliminating the requirement of general acceptability

• By strictly imposing limited legal tender on commodities

Answer 1

Under the barter system, trade required a double coincidence of wants. Money eliminates this difficulty by acting as a universally recognized, common medium of exchange for goods and services.