Compared to a Monetary System of Exchange, the Barter System

question 91

Multiple Choice

Compared to a monetary system of exchange, the barter system does which of the following?

• A)increases transaction costs
• B)lowers the volume of exchange in the economy
• C)promotes inefficient use of time and energy
• D)The barter system does all of the above.

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Definitions:

Income Effect

The change in an individual's or economy's income and how that change will affect the quantity demanded of a good or service.

Substitution Effect

The change in consumption that results from a change in the relative price of goods, leading consumers to substitute away from higher-priced goods.

Income Effect

The income effect describes the change in an individual's or economy's income and how that change will affect the quantity demanded of a good or service.

Normal Good

A type of good for which demand increases as the income of the consumer increases, holding all else constant.