Question

The biggest disadvantage of a barter system compared to one that uses money is that Select one:

A. all commodities are difficult to transport and therefore inefficient for exchange.
B. each trade requires a double coincidence of wants.
C. a standardized unit of account cannot exist in a barter system.
D. commodities are difficult to use as a store of value.
E. it is difficult to find goods to trade in a barter system that satisfy the needs of society.

Answer 1

The biggest disadvantage of a barter system is that each trade requires a double coincidence of wants. It is also difficult to enter into future contracts for purchasing goods and services, and there is no standardized unit of account.

Step-by-step explanation:

The biggest disadvantage of a barter system compared to one that uses money is that each trade requires a double coincidence of wants. In a barter system, an exchange between two people would involve a situation in which both parties want something the other person can provide. This can be difficult to arrange, especially in a modern economy with extensive division of labor that involves thousands of different jobs and goods.

Additionally, the barter system does not allow for easily entering into future contracts for purchasing goods and services. For example, if the goods are perishable, it may be difficult to exchange them for other goods in the future, preventing a farmer from using a fresh crop to buy a tractor in six months.

Finally, the barter system does not provide a standardized unit of account, which makes it challenging to compare values of different commodities. Money acts as a medium of exchange, a store of value, and a unit of account, which makes it more efficient and convenient for transactions.