Practicing Success
Money acts as a "Medium of exchange" to facilitate sale. According to you, it eliminates which of the following? |
Double coincidence of wants Store of value Unit of account All of the above |
Double coincidence of wants |
Double co-incidence of wants is an economic phenomenon where two parties each hold an item that the other wants, so they exchange these items directly without any monetary medium. Money by providing the crucial intermediate step eliminates the need for double coincidence of wants. It is no longer necessary for the shoe manufacturer to look for a farmer who will buy his shoes and at the same time sell him wheat. All he has to do is find a buyer for his shoes. Once he has exchanged his shoes for money, he can purchase wheat or any other commodity in the market. |