The use of money contributes to economic eﬃciency because
A) governmental direction of the production and distribution of output can be avoided by using money.
B) roundabout production could not occur without the availability of money.
C) it is necessary for the creation of capital goods.
D) it promotes specialization by overcoming the problems with barter.

Question

Quizplus · Accepted Answer

Money promotes specialization because it overcomes the difficulties with barter. In a barter economy, individuals would have to find someone who has the exact goods or services they need, and who also needs what they have to offer. This is a time-consuming and inefficient process. Money, on the other hand, allows individuals to trade with anyone, and the value of goods and services can be easily compared and measured. This promotes efficiency in production and encourages specialization, as individuals can focus on producing the goods or services in which they have a comparative advantage.

The Use of Money Contributes to Economic Eﬃciency Because