A rural economy is transitioning from self-sufficient household production to a system based on a strict division of labour. Which of the following best describes how the introduction of money, rather than a reliance on a barter system, facilitates this transition?
It eliminates the necessity of a double coincidence of wants, lowering transaction costs and enabling specialised producers to easily exchange their surplus.
It acts as a reliable store of value, which guarantees that the real purchasing power of the specialised producers' savings is completely insulated from inflation.
It functions as a unit of account, which directly prevents the onset of diminishing marginal returns in the newly specialised production processes.
It acts as a medium of exchange, decreasing the volume of trade required by encouraging households to become increasingly self-sufficient.
156 exam-style questions on AQA A Level Economics 1.4 Production, costs and revenue, covering 1.4.1 Production and productivity, 1.4.2 Specialisation, division of labour and exchange, 1.4.3 The law of diminishing returns and returns to scale (A-level only), 1.4.4 Costs of production, 1.4.5 Economies and diseconomies of scale, 1.4.6 Marginal, average and total revenue, 1.4.7 Profit, and 1.4.8 Technological change (A-level only). Each one has a worked solution and a mark scheme showing where the marks go.