Compared to an economy that uses a medium of exchange,in a barter economy
A)transaction costs are higher.
B)transaction costs are lower.
C)liquidity costs are higher.
D)liquidity costs are lower.

Question

Quizplus · Accepted Answer

In a barter economy, transactions require a direct exchange of goods or services, which can be cumbersome and time-consuming. This raises transaction costs, which are the costs incurred in making an economic transaction, such as searching for a trading partner, negotiating the terms of the trade, and ensuring that the goods or services exchanged are of equal value. In contrast, in an economy that uses a medium of exchange, such as money, transaction costs are lower because money serves as a common denominator that simplifies trading and enables people to specialize in their most productive activities.

Compared to an Economy That Uses a Medium of Exchange,in