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

Many times we see banks advertise - "Anywhere Banking: Anytime Banking". Which of the following products/facilities launched by banks make it possible for the customers to avail banking services 24 hours all seven days?
A. ATM
B. Internet Banking
C. Universal cheque book facility

  1. Only (A)

  2. Only (B)

  3. Both (A) and (B)

  4. All (A), (B) and (C)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

  • An automated teller machine (ATM) is an electronic telecommunications device that enables customers of financial institutions to perform financial transactions, such as cash withdrawals, deposits, transfer funds, or obtaining account information, at any time and without the need for direct interaction with bank staff.
  • Internet banking is an electronic payment system that enables customers of a bank or other financial institution to conduct a range of financial transactions through the financial institution's website.
  • A cheque is a document that orders a bank to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued.
All these facilities are available to a customer all the time.

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

In which of the following fund transfer mechanisms, can funds be moved from one bank to another and where the transaction is settled instantly without being bunched with any other transaction?

  1. RTGS

  2. NEFT

  3. TT

  4. EFT
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

RTGS (Real Time Gross Settlement) is a system where funds are transferred on a gross basis in real-time, meaning each transaction is settled individually and immediately.

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

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

  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
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

An increase in the repo rate makes borrowing more expensive for banks, which leads to higher interest rates for consumers and businesses, potentially slowing industrial output and increasing deposit rates.

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

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

  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
Reveal answer Fill a bubble to check yourself
A Correct answer
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. 

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

Which of these is not a function of money?

  1. Medium of exchange

  2. Store value

  3. Power indicator

  4. Measurement of value
Reveal answer Fill a bubble to check yourself
C Correct answer
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. 

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

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

  1. unit of measurement

  2. store value

  3. standard of deferred payment

  4. medium of exchange
Reveal answer Fill a bubble to check yourself
C Correct answer
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. 

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

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

  1. speculative

  2. transaction

  3. precautionary

  4. store
Reveal answer Fill a bubble to check yourself
C Correct answer
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. 

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

Demand deposits are included in ________.

  1. M1

  2. M2

  3. Both

  4. None
Reveal answer Fill a bubble to check yourself
C Correct answer
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. 

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

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

  1. Store of value

  2. Medium of exchange

  3. Standard of value

  4. Display of power
Reveal answer Fill a bubble to check yourself
C Correct answer
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.