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The process of trading goods and services without the exchange of money.

The diagram below illustrates the process of barter between a farmer and a builder. As long as a double coincidence of wants is present between the two economic agents then they can engage in a mutually beneficial cashless exchange of goods.

This was the main form of exchange before a monetary system was introduced in all modern economies. Barter was eventually phased out as it became inefficient due to the variety of goods available increasing as a result of specialisation in the production process.


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