Tag: liquidity preference and profit

Questions Related to liquidity preference and profit

The amount saved under transaction motive depends on the level of ____________. 

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

  1. savings

  2. income

  3. interest

  4. rent

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Correct Option: B
Explanation:
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. Therefore, the amount of money saved under transaction motive depends upon the level of income in the economy. 

The _________________ relates to the desire of the people to hold cash in order to take advantage of market movements regarding the future changes in the price of bonds and securities in the capital market.

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

  1. speculative motive

  2. precautionary motive

  3. demand motive

  4. transaction motive

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Correct Option: A
Explanation:

The speculative motive relates to the motive of the public to hold cash in their hand in order to take advantages of the market actions and movement in the future where they can influence the future change in the price of bonds and securities in the capital market.

The speculative motive relates to the desire of the people to hold cash in order to take advantage of market movements regarding the future changes in the price of bonds and securities in the capital market.

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

  1. True

  2. False

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Correct Option: A
Explanation:

The speculative motive relates to the motive of the public to hold cash in their hand in order to take advantages of the market actions and movement in the future where they can influence the future change in the price of bonds and securities in the capital market. 

The financial market for short term funds is known as ___________.

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

  1. capital market

  2. money market

  3. bullion market

  4. share market

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Correct Option: B

The portion of income not spent on ________ is saving.

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

  1. consumption

  2. production

  3. distribution

  4. none of the above

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Correct Option: A
Explanation:

Saving is that part of income which is not spent on consumption. It is also called deferred consumption.

Which one of the following is the most important determinant of speculative demand for money?

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

  1. Income

  2. Interest rate

  3. Profits

  4. Prices

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Correct Option: B
Explanation:

The demand for money for speculative purposes in order to undertake investments for future returns is based upon the rate of interest prevailing in the economy. It is algebraically expressed in the form of a function as:  $S _{m}=f(r)$.

Who proposed a model to apply economic order quantity concept of inventory management to determine the optimum cash holding in a firm?

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

  1. Keith V. Smith

  2. Miller and Orr

  3. William J. Baumol

  4. J.M. Keynes

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Correct Option: C

Technique of 'Transaction Analysis' was developed by __________.

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

  1. Elton Mayo

  2. Peter Drucker

  3. Eric Berne

  4. Adam Smith

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Correct Option: C

Many a time we read in newspaper about the benefits of National Electronic Funds Transfer (NEFT), a delivery service launched by the bank. Why do banks advocate for such delivery channels?
A. It is a system in which no physical transfer takes place, hence risk is very low.
B. In this system banks are not required to transfer any money actually to the account of the customer. Only book adjustment is done. Hence actual fund is not needed.
C. This facility is available to anybody at any place. Even having a bank account is not at all necessary.

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

  1. Only (A) is correct

  2. Only (B) is correct

  3. Only (C) is correct

  4. Both (A) and (B) are correct

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Correct Option: D
Explanation:

National Electronic Funds Transfer (NEFT) is a nation-wide payment system facilitating one-to-one funds transfer.

Under this Scheme, individuals can electronically transfer funds from any bank branch to any individual having an account with any other bank branch in the country participating in the Scheme.

Various banks in the country have installed machines which disburse money to general public. These machines are called _______.

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

  1. coin dispensing machines

  2. ATMs

  3. debit card machines

  4. ledger machines

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Correct Option: B
Explanation:

An ATM, which stands for automated teller machine, is a specialized computer that makes it convenient to manage a bank account holder's funds.
It allows a person to check account balances, withdraw or deposit money, print a statement of account activities or transactions, and even purchase stamps