Tag: value, nature and functions of money

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Questions Related to value, nature and 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. 

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

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

  1. savings

  2. income

  3. interest

  4. rent
Reveal answer Fill a bubble to check yourself
B Correct answer
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. 
Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

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.

  1. speculative motive

  2. precautionary motive

  3. demand motive

  4. transaction motive
Reveal answer Fill a bubble to check yourself
A Correct answer
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.

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

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.

  1. True

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

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

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

  1. Income

  2. Interest rate

  3. Profits

  4. Prices
Reveal answer Fill a bubble to check yourself
B Correct answer
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:  $S _{m}=f(r)$.

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

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

  1. Keith V. Smith

  2. Miller and Orr

  3. William J. Baumol

  4. J.M. Keynes
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

William J. Baumol applied the Economic Order Quantity (EOQ) model to cash management in 1952, treating cash as an inventory item to minimize total costs.