Question

If the exchange costs associated with monetary exchange become sufficiently large, barter may be cheaper than monetary exchange even if the number of goods in the economy is greater than 3. T/F?

Answer 1

A barter system is that where there is trade occurs with direct exchange in goods and services. And there is no medium of exchange involves, such as money.

Barter can replace monetary system, when there will be monetary crisis, or the currency is unstable or the money is not available for monetary exchange.

But there is limitations of Barter system which is indivisibility of certain goods, if a person wants to buy certain amount of another goods, but provides an indivisible amount of goods, which costs more.

When there will be more things available people can expand their choice and the system will work well.

So the statement is true.