Ch:7 Money

Question 1

What is Barter?

Answer 1

Barter means direct exchange of one good with another when money is not used as a medium of exchange.

Question 2

Define Barter system in the words of stainly Fisher?

Answer 2

Ans: Barter economy means the economy in which no good is generally accepted and goods are exchanged with goods.

Question 3

Define Barter system in the words culberon?

Answer 3

Ans: In Barter system, the prices of goods are shown in the form other goods.

Question 4

Define money in the words of Prof Crowther?

Answer 4

Anything which is generally accepted as a medium of exchange and also performs functions of a standard of value and a store of value is money.

Question 5

Define money in the words of Prof Keynes?

Answer 5

Money is a thing by which payments of agreement of borrowing and pricing are
made and general purchasing power is stored in it.

Question 6

What is meant by metallic money?

Answer 6

Money that is made of some metal e.g., gold, silver, copper or brass etc is called metallic money. This money consists of metallic coins which circulate throughout the country as money.

Question 7

How many kinds are of metallic money?

Answer 7

There are two kinds of metallic money.
(1)Standard metallic money.
2)Token metallic money.

Question 8

Explain metallic standard money?

Answer 8

Metallic standard money: It is the metallic coin whose face value is equal to its intrinsic value. Such coin is also called “Full Bodied coin” one rupee silver coin used in subcontinent from 1835 to 1893 was full-bodied coin.

Question 9

What is meant by token money?

Answer 9

It is the metallic coin whose face value is greater that its intrinsic value. In the present age, Token money is being used in all countries of the world.

Question 10

What is meant by Paper money?

Answer 10

Paper money means notes made of paper which are issued by the government or by the central bank of the country. The notes are legal tender money. The notes are accepted in general business dealings as
medium of exchange.

Question 11

How many kinds are of paper money?

Answer 11

There are two kinds of paper money.
(1)Convertible paper money.
(2) Inconvertible paper money.

Question 12

What is meant by convertible paper money?

Answer 12

The paper money which can be
converted in standard metallic money e.g., gold, silver, or foreign exchange on
demand, is called Convertible paper money. These notes are issued by the central bank of the country.

Question 13

What is meant inconvertible paper money?

Answer 13

These are the notes that cannot be
converted in gold or silver or foreign exchange. In other words Govt of the
country does not take the responsibility for converting them in gold, silver or
foreign exchange. But these notes are legal tender money. So all the people are
bound to accept them as medium of exchange.

Question 14

What is meant by credit money?

Answer 14

It is a kind of money which has no legal cover but circulates in the country just
because of trust or belief. Cheques, drafts, credit cards and bills of exchange etc, issued by commercial banks are credit money.

Question 15

Define legal tender money.

Answer 15

Legal tender money means the money, which is legally accepted. The people of a
country are bound to accept it in general dealings and payments of loans. The
person who refuses to accept it is a criminal in the eye of law. He is entitled to punishing.

Question 16

How many kinds are of legal tender money?

Answer 16

there are two kinds of legal tender money.
(1) Limited legal lender money.
(2)Unlimited legal tender money.

Question 17

Explain limited legal tender money?

Answer 17

The kind of money in which payment can be made only to a certain extant is called Limited legal tender money. In Pakistan, 25 paisa and other lower value coins were limited legal tender money. One could pay up to 20 rupees by these coins.

Question 18

Explain unlimited legal tender money?

Answer 18

Unlimited Legal tender money: The kind of money which has no specific extant
to be accepted by the people whatever amount of this kind of money may be, it is accepted by every one and no one can refuse it.

Question 19

What is meant by near money?

Answer 19

The money which is not used at once for business dealings but it can be converted in net cash after a little effort, is called near money. Saving deposits, time deports, deposited in banks, Govt securities, bonds, shares of firms are near money.

Question 20

What is meant by money of account?

Answer 20

It means the unit of money by which the value of goods and services is expressed. Money of account of Pakistan. is ‘rupee
because all people count their money in rupees. In the same way, price of all
goods and services is also expressed in rupees.

Question 21

What is meant by foreign exchange?

Answer 21

The currencies of some countries possess high and stable value. They are accepted at international level. They are used as medium of exchange in international trade. These currencies are called foreign exchange.
American dollar, British pound, Japanese Yen etc. are foreign exchange.

Question 22

Define quantity theory of money in the words of Prof Taussig

Answer 22

Double the quantity of money and other thongs being equal, Prices will be twice
as high as before and the value of money one half. Half the quantity of money and other things being equal, prices will be one half of what they were before and the value of money double.

Question 23

Write Fishers equation of exchange?

Answer 23

Following is Fisher’s equation of exchange:
P =(MV + MV) / T

Question 24

Define Inflation in the words of Prof Ackley Gardener?

Answer 24

When the price level rises continually with a great speed, this situation is called
inflation.

Question 25

Define Deflation?

Answer 25

Deflation means a situation in which quantity of money is less than the quantity of goods and services and Prices of goods and services fall down. The income of the people also falls and unemployment increases.
OR
Deflation is a situation when monetary demand for goods and services is less than their current supply.

Question 26

Write difficulties of barter system?

Answer 26

Following are difficulties of barter system:
1-Lack of double coincidence of wants.
2-Lack of common measure of value.
3-Lack of store of value.
4-Goods of small value cannot be attained in exchange of indivisible goods of high value.
5-Difficulty in transfer of wealth.

Question 27

Define money in the words of Prof Walker?

Answer 27

What performs functions of money, is money

Question 28

Write characteristics of good money?

Answer 28

Following are characteristics of good money:
1-General acceptability.
2-Durability.
3-Homogeneity.
4-Divisibility.
5-Convertibility
6-Recognisability.
7-Reasonable quantity.
8-Stability in value.
9-Should not be forged.

Question 29

Write functions of money?

Answer 29

Following are functions of money: Money performs the following functions
1-Money serves as a:
2-Medium of exchange.
3-Common measure of value.
4-Store of value.
5-Standards of future payments.
6-Transfer of value.
7-A base for Govt. payments and revenues.
8-Unit of account.

Question 30

Write kinds of money?

Answer 30

Ans: Following are the kinds of money.
1-Metallic money.
a)Standard metallic money.
b)Token metallic money.
2-paper money
a)convertible paper money
b)inconvertible money
3-Credit money
4-legal tender money
a)limited legal tender money
b)unlimited legal tender money
5-Near money
6-Money of account
6-Foreign exchange

Question 31

Write assumptions of quantity theory of money?

Answer 31

Following are the assumptions of quantity theory of money.
1-Quantity of goods should not change.
2-Velocity of circulation of money should not change.
3-Quantity of barter trade should not change.
4-Quantity of hoarded money should not change.
5-Issued money should be in use.

Question 32

Write any four effects of inflation?

Answer 32

Following are four effects of inflation:
1-Investment and production increase.
2-Cost of living increases.
3-Savings are discouraged.
4-Exports decrease.

Question 33

Write four causes of inflation?

Answer 33

Following are four causes of inflation:
1-Increase in the quantity of money.
2-Increase in costs of production of commodities.
3-Rapid increase in population.
4-Inflation on international level.

Question 34

Write four measures to control inflation?

Answer 34

Following are four measures to control inflation:
1-Increase in bank rate.
2-Increase in Taxes.
3-Increase in production of goods and services.
4-Control on population and prices.

Question 35

What is Bank rate?

Answer 35

The rate at which central bank advances loans to commercial banks is called bank rate.

Question 36

Write four effects of deflation?

Answer 36

Following are four effects of deflation:
1- Decrease in national income.
2-Increase in unemployment.
3-Increase in ravings or net cash.
4-Decrease in the speed of economic development.

Question 37

Write four causes of deflation?

Answer 37

Following are four causes of deflation:
1-Decrease in the demand for goods.
2-Decrease in purchase.
3-Decrease in consumption.
4-Decrease in income,

Question 38

Write four measures to control deflation?

Answer 38

Following are four measures to control deflation:
1-Rate of interest should be decreased.
2-Government should increase its expenditures.
3-Govt should encourage private investment.
4-Exports should be increased.

Question 39

Write is meant by Monetary measures?

Answer 39

The measures taken by the central bank to control inflation or deflation, are called monetary measures.

Question 40

What is meant by fiscal measures?

Answer 40

The measures that a Govt takes to control inflation or deflation by changing its income and expenditures are called fiscal measures.

Question 41

Write stages of evolution of money?

Answer 41

Following are the stages of evolution of money.
1-Commodity money.
2-Metallic money.
3-Paper money.
4-Credit money.