What is a barter system with example?

Barter is a system where goods are exchanged without the use of money. In large economies, a barter system is not feasible due to the massive costs that will be incurred in order to find the right people to exchange their surpluses. You can read about the Monetary System – Types of Monetary System (Commodity, Commodity-Based, Fiat Money) in the given link.

Money is a medium of exchange, whereas in the barter system, money is not used as a medium of exchange, rather one type of goods is exchanged for another type of goods. An example of a barter system is selling rice to purchase wheat. One cannot carry forward the wealth in the barter system because one cannot store surplus rice for long periods of time as rice is a perishable item.

Further readings:

  1. Indian Economy Notes for UPSC Civil Service Exam
  2. Monetary Policy – Objectives, Role, Instruments 

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