Tag: liquidity preference and profit

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

Money means anything that serves as ______________.

  1. medium of Exchange

  2. common measure of value

  3. store of Value

  4. all of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Money is defined by its ability to act as a medium of exchange, a common measure of value, and a store of value. Since all these options are standard functions of money, 'all of the above' is correct.

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

Narrow money refers to ________.

  1. $M _1$

  2. $M _2$

  3. $M _3$

  4. $M _4$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

As per the revised definition of M1 as a measure of money stock in India, it can be defined as currency plus demand deposits with commercial banks plus other deposits with RBI.
Since, this definition of money supply is narrow, it is termed as narrow money.

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

 Money is ___________.

  1. neutral for production

  2. helpful for production

  3. harmful for production

  4. distorts production
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Money facilitates trade and investment, which are essential for production processes. By providing liquidity and a medium for exchange, it acts as a catalyst for economic activity.

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

Which of the following is not a function of money?

  1. It is a medium of exchange

  2. It has general acceptability

  3. It is a standard measure of value

  4. It is hedge against inflation
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The primary functions of money are medium of exchange, unit of account, and store of value. While money can be used to hedge against inflation, this is not a fundamental definition or function of money itself.

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

The chief function of money is that of __________.

  1. a medium of exchange

  2. a reserve base for credit creation

  3. providing liquidity

  4. none of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The most fundamental and primary function of money is to serve as a medium of exchange, which solves the double coincidence of wants problem inherent in barter systems.

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

Which of the following is not a function of money?

  1. Medium of exchange

  2. Unit of account

  3. Standard of deferred payment

  4. Store of metal
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Store of METAL is not a function of money. 'Store of VALUE' is a function - money preserves purchasing power. 'Store of metal' suggests hoarding physical metal, which is not a monetary function. The actual functions are medium of exchange, unit of account, standard of deferred payment, and store of VALUE.

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

Money is most liquid of all the assets because ___________.

  1. it is readily convertible into other assets

  2. it can be easily stored

  3. it gives income to the holder

  4. it has no carrying cost
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Liquidity refers to the ease with which an asset can be converted into a medium of exchange without loss of value. Money is the most liquid asset because it is already the medium of exchange.

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

Which of the following are the functions of money?
(i) Medium of exchange
(ii) Unit of account
(iii) Store of value
(iv) Standard of deferred payments.

  1. (i) and (ii) only

  2. (i), (ii) and (iii) only

  3. (ii) and (iv) only

  4. (i), (ii), (iii) and (iv)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Medium of exchange, unit of account, store of value, and standard of deferred payments are all widely recognized primary and secondary functions of money.

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

The transaction motive relates to the desire of the people to hold cash for the future transactions.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

False. 

Transaction motive basically relates to the desire of the public to let the cash move freely in the economy through depositing it into the banks and initiating the process of credit creation in the economy. Transaction motive even relates to the motive of not influencing the price changes in the capital market.