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Money and Banking by William D. Gerdes

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CHAPTER 1

Money and Monetary Systems

Money, Barter, and Exchange

Apart from the act of production, voluntary exchange is the major means available for individuals to improve their material living standards. When two individuals engage in an exchange, the motive of each is to improve his or her welfare. Because each individual gives up something of lesser value for something they perceive to have greater value, the exchange is mutually beneficial. Both parties gain as a consequence of the transaction.

There are two general forms of voluntary exchange: barter and those involving money. Barter is a direct exchange, where goods and services are exchanged for other goods and services. A requisite for a barter transaction is the existence of a double ...

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