Tag: theories of distribution

Questions Related to theories of distribution

By increasing repo rate, the economy may observe the following effect(s) ____________________.

economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

  1. Rate of interest on loans and advances will be costlier.

  2. Industrial output would be affected to an extent.

  3. Banks will increase rate of interest on deposits.

  4. All of these

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Correct Option: D

According to Keynes, the speculative demand for money is due to __________.

economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

  1. money is better store of value than any other long term financial assets

  2. higher returns on speculative activities

  3. general tendency to speculate to make quick return

  4. all the three

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Correct Option: A
Explanation:

According to J.M. Keynes, Money has speculative demand due to its function as a better store of value than any other long tern financial asset because of the following two reasons: 

(i) Money in not perishable as it does not have any age, its is not time bounded and does not gets old which makes it a better store of value. 
(ii) The rate of money does not change with time as in case of securities and bonds. The value of the currency remains intact even if there is fluctuations in the money market which makes it the best store of value. 

Which of these is not a function of money?

economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

  1. Medium of exchange

  2. Store value

  3. Power indicator

  4. Measurement of value

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Correct Option: C
Explanation:

Money refers to a common medium of exchange that is issued under the law of government and acts as a legal tender for the whole country. The functions of money can be classified into two categories: 

1. Primary function: The primary function of money includes money as a medium of exchange and money as a measure of value.


2. Secondary function: The secondary function of money includes money as a store of value and money as a standard of deferred payment. 


Therefore, power indicator is not a function of money. 

When saving are given as a loan and borrower repays the amount, money serves the function of  ________.

economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

  1. unit of measurement

  2. store value

  3. standard of deferred payment

  4. medium of exchange

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Correct Option: C
Explanation:

Deferred payments refer to payments made on loans, salaries, pensions, insurance premium, interests, and rents. The necessary condition for deferred payment is that the amount of repaid money should be the same as it was at the time of purchase of the good or at the time of taking loan. Since all the goods and services can be expressed in terms of money, it makes the future payments easy and functional. Moreover, the value of currency does not change with time which makes it easy for the borrower to take money and repay it in future. Therefore, money serve as a standard of deferred payment. 

If someone keeps some money for bad days, this demand for money is known by_________ motive of money.

economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

  1. speculative

  2. transaction

  3. precautionary

  4. store

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Correct Option: C
Explanation:

Precautionary motive of money refers to the demand for money to store it for future uncertainties. In other words, if money is demanded so that it can be kept for bad days then the demand of such money is known by the precautionary motive of money. In such cases, money functions as the store of value. 

Demand deposits are included in ________.

economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

  1. M1

  2. M2

  3. Both

  4. None

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Correct Option: C
Explanation:

Money supply refers to the total stock of money of all types ( currency as well as demand deposits) held by the people of a country at a given point of time. 

Money supply is measured in several ways which includes M1, M2, M3 and M4  measurement of money supply. Every measurement has it own definition with different components varying from most liquid to most rigid form. 

Demand deposits refers to the deposits of the people which is held by the commercial banks which can be withdrawn on demand. These are included in M1 and M2 measurement of money supply as they are considered the liquid money supply in the economy. 

Which of the following function does money serve when used to measure the prices of different goods and services?

economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

  1. Store of value

  2. Medium of exchange

  3. Standard of value

  4. Display of power

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Correct Option: C
Explanation:

Money as a standard of value or measure of value refers to that function of money which helps in determining the value of goods and services in the economy. Money is taken as the common denominator while measuring the value of goods and services in monetary terms according to which prices are measured for all commodities in the economy. 

Which of the following function does money serve when used to purchase or sell different goods and services?

economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

  1. Store of value

  2. Medium of exchange

  3. Standard of value

  4. Display of power

Show answer
Correct Option: B
Explanation:

Money refers to a common medium of exchange that is issued under the law of government and acts as a legal tender for the whole country. As a medium of exchange, money functions as a mode of exchanging goods and services. In this function of money, money is used to purchase or sell different goods and services in the market. 

To check the accuracy of index by shifting the base year, which test is used ________________.

economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

  1. Circular test

  2. Time reversal test

  3. Unit test

  4. None

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Correct Option: A

Which of the following is not a characteristic of a price taker?

economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

  1. TR=P x Q

  2. AR=Price

  3. Negatively - sloped demand curve

  4. Marginal Revenue = Price

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Correct Option: C
Explanation:

Price taker firm exist in ease of perfect competition where the demand curve is a straight line parallel to the x-axis as the firm can sell any amount of the commodity at the same price. So demand curve will not be negatively sloped.