Tag: value, nature and functions of money

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

As per Irving Fisher principle, if the quantity of money is reduced by one half  ________.

  1. the price level will also be reduced by one half

  2. value of money will be twice

  3. the price level will be double and the value of money will be one half

  4. the price level will also be reduced by one half and value of money will be double.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

According to the Fisher equation of exchange (MV=PT), if velocity (V) and transactions (T) are constant, the price level (P) is directly proportional to the money supply (M). If M is halved, P is halved, and since the value of money is the reciprocal of the price level (1/P), it doubles.

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

The transaction approach to the "Quantity Theory of Money" is given by ____________.

  1. Frisch

  2. Fisher

  3. Finlay

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

This appears to be a duplicate of question 473932. Irving Fisher developed the transaction approach to the Quantity Theory of Money, expressed as MV = PT. This focuses on money's role in facilitating transactions. Frisch is associated with econometrics, not monetary theory. Fisher's formulation is the standard transaction-based version taught in economics.

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

Functions of money doesn't include:

  1. Medium of exchange

  2. Store of value

  3. Measure of value

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

The primary functions of money are medium of exchange, store of value, and measure of value. Employment generation is an economic goal or outcome, not a functional definition of money itself.

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

Which of the following statements about Money is incorrect?

  1. There are many assets which carry the attribute of money.

  2. Money is what money does.

  3. Value of money remains constant at all periods of time

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The value of money is inversely related to the price level. Because price levels fluctuate due to inflation or deflation, the value of money does not remain constant over time.

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

In dynamic sense, money serves the following purposes:

  1. Gives direction to economic trends.

  2. Encourages specialisation and division of labour.

  3. Ensures transformation of savings into investments.

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

In a dynamic sense, money facilitates economic growth by allowing for specialization, enabling investment through savings, and signaling economic trends through price changes.

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

When we say that Money serves as a common measure of value, we are considering the _________ aspect of Money.

  1. Static

  2. Dynamic

  3. Both (a) and (b)

  4. Neither (a) nor (b)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The static aspect of money refers to its role in facilitating current transactions and providing a stable unit of account at a specific point in time.

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

When we say that Money serves as a standard for deferred payments, we are considering the _________ aspect of Money.

  1. static

  2. dynamic

  3. Both (a) and (b)

  4. Neither (a) nor (b)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The standard of deferred payments is considered a static function because it provides a fixed unit to settle debts and contracts, maintaining consistency in accounting.