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

Out of the following which assets is most liquid?

  1. shares of stock

  2. government securities

  3. land

  4. currency
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Liquid asset refers to the assets which are either in the form of cash or can easily be converted in to cash. Since currency of any country is already in the form of cash. Therefore, currency is considered the most liquid asset among all the assets in the economy. 

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

When the liquidity trap occurs the demand for money ________________.

  1. becomes perfectly interest elastic

  2. becomes perfectly interest inelastic

  3. means that an increase in money supply leads fall in the interest rate

  4. means that an increase in the money supply to an increase in the interest rate
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A liquidity trap is an economic situation where people hoard financial capital instead of investing or consuming it as the interest rates are low and savings rates are high which renders the monetary policy ineffective. So, people believe that the interest rates will soon rise which might decrease the prices of the bonds. Therefore, the demand for money depends on the rate of interest in the economy which hence makes the demand for money perfectly interest elastic. 

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

It is uncommon for an item to be liquid if

  1. It is not acceptable in the market

  2. Can not be sold in the market

  3. Not accepted by creditors

  4. Both a & b
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Liquidity requires that an asset be easily accepted in the market for exchange. If an item cannot be sold or is not accepted by creditors, it lacks liquidity.

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

Money is a matter of functions of four, ___________.

  1. medium, income, standard and store

  2. medium, measure, standard and store

  3. medium, measure, profit and store

  4. medium, quantity, standard and store
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The four classic functions of money are medium of exchange, measure of value, 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

Which of the following are the seven parts of the financial system?

  1. Financial instruments, credit cards, financial instruments, regulatory agencies, central banks, Federal reserve System, money

  2. Financial instruments, money, financial instruments, the Security and Exchange Commission, central banks, Federal Reserve System, credit cards

  3. Money, financial instruments, financial markets, financial institutions, regulatory agencies, central banks, Federal Reserve System

  4. Money, financial instruments, financial markets, banks, regulatory agencies, central banks, Federal Reserve System, credit cards
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The financial system is typically categorized into these seven components: money, financial instruments, financial markets, financial institutions, regulatory agencies, central banks, and the Federal Reserve System.

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

The relatively less important functions of money are called __________.

  1. secondary function

  2. derived functions

  3. both (A) and (B)

  4. derivative function
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Functions of money are often categorized as primary and secondary (or derived). The less important functions are generally referred to as secondary or derived functions.