Final answer:
Barter is an ancient exchange system where goods and services are traded directly without money, requiring a double coincidence of wants. Money serves as a medium of exchange and simplifies transactions by providing a universally accepted measure of value, allowing economies to grow and become more complex.
Step-by-step explanation:
The term barter refers to an ancient system of exchange where individuals trade goods and services directly without the use of money. Bartering requires a double coincidence of wants, which means that each party must have what the other desires at the time of the exchange, making it a complex and often inefficient process, especially in modern economies with an extensive division of labor. The presence of money eliminates the need for this coincidence, as money acts as a universal medium of exchange, simplifying transactions and allowing for easier formation of future contracts.
Initially, people used various items like cowry shells, rice, barley, or rum as money, but eventually, precious metals and minted coins became the standard due to their durability and portability. The introduction of money facilitated economic growth by reducing the time individuals spent bartering and allowing them to focus on production and leisure. In addition, money standardizes the value of goods and services, enabling broader and more sophisticated markets.