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barter


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The exchange of one type of good or service for another, without the use of money. This developed to allow society to take advantage of the division of labour and the gains from specialization. Barter, however, is often inconvenient: a person who has goods of one type and wants goods of another has to find somebody who wishes to make the opposite exchange, either for their own use or as a professional intermediary. The use of precious metals as a medium of exchange, and the subsequent development of money, avoided this inconvenience. Barter is nowadays only used when the monetary system has broken down, in countries subject to civil disorder or hyperinflation, or internationally by countries with inadequate supplies of foreign exchange.

Subjects: Economics.


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