Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Money and Banking

Question:

Barter exchange's major limitation was that it involved huge trading cost. Which of the following costs can be considered as part of trading costs?

Options:

Inequality cost and search cost

Ground cost and utility cost

Search cost and disutility of waiting

None of the above

Correct Answer:

Search cost and disutility of waiting

Explanation:

There were many problems of barter system as it was a commodity for commodity exchanges system. Due to high trade cost, evolution of money began. Trade costs i.e. search cost and disutility of waiting made barter exchange inconvenient as the person A had to wait for person B who has demand for the commodity that the former person is having.