Question 9
HardOriginal questionIn a barter economy with 5 goods, how many exchange rates (prices of one good in terms of another) are needed?
Show the answer and explanation
CorrectNot quiteAnswer B
Correct answer: B
Explanation
Each pair of goods needs one rate: 5 × 4 ÷ 2 = 10.
With money as the unit of account, only 5 prices are needed.
Worth noting
20 counts each pair twice (wheat in cloth and cloth in wheat), but one is just the inverse of the other.
- Concept
- Too many prices under barter
- Typical timeTypical
- 100 s
- Your timeYours
- —
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