In which form of exchange are goods used as a medium of exchange?
Show answer & explanation
Correct answer: D
Explanation
The correct answer is option 4 i.e. Barter exchange.
- In a barter exchange system, goods are used as a medium of exchange.
- This is the earliest form of trade where people directly exchange goods and services without using money.
- For example, one might trade grain for livestock or clothes.
- The barter exchange system relies on a mutual agreement about the value of the goods being exchanged.
- However, it has limitations, such as the need for a double coincidence of wants, where both parties must desire what the other offers.