Which of the following is true if a nation's official money fails to serve as a medium of exchange?
A) Nothing will replace money to help facilitate exchange.
B) There will be an increase in economic efficiency.
C) Resources will divert from production to exchange.
D) Transaction costs of exchange will decrease.
E) Fewer barter exchanges will be completed.

Question

Quizplus · Accepted Answer

If a nation's official money fails to serve as a medium of exchange, resources will divert from production to exchange because people will need to spend more time and effort finding alternative means of exchange, such as bartering or finding a foreign currency to use. This diversion of resources can lead to a decrease in economic efficiency. Option A is incorrect as there will be alternative means of exchange used instead of money. Option B is incorrect as there will be a decrease in efficiency. Option D is incorrect as transaction costs may increase due to the search costs of finding alternative means of exchange. Option E is not necessarily true as some barter exchanges may still be completed, but it is likely that fewer will be because of the inconvenience and inefficiency of bartering.

Which of the Following Is True If a Nation's Official