Social Science (087) — AI-generated practice question

Double coincidence of wants means that both parties in an exchange must want exactly what the other has to offer. For example, a shoe manufacturer wanting wheat must find a farmer who not only wants to sell wheat but also wants to buy shoes in return. This is an essential feature of a barter system.

Money eliminates this requirement by acting as a medium of exchange — an intermediate step. The shoe manufacturer only needs to find a buyer for his shoes, receive money, and then use that money to buy wheat from any seller. Thus, the two transactions are separated, and mutual agreement to exchange is no longer necessary.

Source: Money and Credit, Chapter 3

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• 1 mark for defining double coincidence of wants correctly.
• 1 mark for a relevant example (shoe manufacturer/farmer works perfectly as it's straight from the textbook).
• 1 mark for explaining how money, as a medium of exchange, removes this requirement by splitting one barter transaction into two separate money transactions.
• Use the textbook example — examiners recognise it and it scores full marks.
• Key phrase to include: "medium of exchange" and "intermediate step".