MONEY

Question 1

DEFINITION OF MONEY

Answer 1

IT IS CONSIDERED AS THE MEDIUM OF EXCHANGE, MEASURE OF VALUE, STORE OF VALUE, AND MEANS OF STANDARD OF DEFERRED PAYMENTS.

Question 2

DEFINITION OF MONEY SUPPLY

Answer 2

IT IS THE TOTAL VOLUME OF MONEY HELD WITH THE PUBLIC AT A POINT OF TIME.

Question 3

FEATURES OF MONEY SUPPLY

Answer 3

1. IT IS A STOCK CONCEPT

2. IT INCLUDES THE MONEY USERS (INDIVIDUALS, FIRMS) NOT THE MONEY CREATORS (RBI, GOVERNMENT)

Question 4

4 MEASURES OF MONEY SUPPLY WERE INTRODUCED WHEN?

Answer 4

1977

Question 5

M1?

Answer 5

INCLUDES THE CURRENCY AND COINS WITH PUBLIC, DEMAND DEPOSITS WITH BANK, OTHER DEPOSITS WITH RBI

Question 6

WHAT IS CURRENCY MONEY ALSO KNOWN AS

Answer 6

FIAT MONEY - MONEY WHICH IS UNDER FIAT/ ORDER OF GOVERNMENT TO BE COMMONLY ACCEPTED UNDER LAW
LEGAL TENDER MONEY - LEGALLY USED

Question 7

WHAT DO OTHER DEPOSITS WITH RBI INCLUDE?

Answer 7

INCLUDES DEPOSITS OF FOREIGN BANKS, GOVERNMENT, WORLD BANK, IMF
IT DOESN’T INCLUDE DEPOSITS OF OWN GOVERNMENT OR FINANCIAL BANKS.

Question 8

M2 INCLUDES

Answer 8

M1 + SAVINGS OF POST OFFICE SAVINGS BANK

Question 9

M3 INCLUDES

Answer 9

M1 + NET TIME DEPOSITS

Question 10

M4 INCLUDES

Answer 10

M3 + TOTAL DEPOSITS WITH POST OFFICE SAVINGS BANK

Question 11

WHICH IS THE MOST AND LEAST LIQUID

Answer 11

M1 - MOST LIQUID M4- LEAST LIQUID

Question 12

WHICH IS THE MOST COMMONLY USED

Answer 12

M3

Question 13

WHAT ARE THEY KNOWN AS

Answer 13

M1 AND M2 - NARROW MONEY SUPPLY

M3 AND M4 - BROADER MONEY SUPPLY.

Question 14

EVOLUTION OF MONEY -
METALLIC MONEY 
PAPER MONEY
PLASTIC MONEY 
CREDIT MONEY/BANK MONEY

Answer 14

COINS
NOTES
- CREDIT AND DEBIT CARDS
CHEQUES

Question 15

LEGAL TENDER MONEY

Answer 15

MONEY WHICH CAN BE USED LEGALLY TO PAY DEBT OR FOR OTHER OBLIGATIONS

Question 16

WHAT ARE TWO TYPES OF LEGAL TENDER MONEY

Answer 16

LIMITED LEGAL TENDER - THIS TYPE OF MONEY CAN ONLY BE USED TO A CERTAIN LIMIT AND THE PERSON CAN REFUSE TO ACCEPT SUCH MONEY. LEGAL ACTION CANT BE TAKEN AGAINST THAT PERSON. EXAMPLE - COINS

UNLIMITED LEGAL TENDER - THE TYPE OF MONEY THAT CAN BE USED WITHOUT A LIMIT, LEGAL ACTION CAN BE TAKEN AGAINST SOMEONE REFUSING TO ACCEPT THIS MONEY.

Question 17

FUNCTIONAL DEFINITION

Answer 17

MONEY IS ANYTHING THAT FULFILLS THE FOUR BASIC FUNCTIONS

Question 18

MONEY/LIQUID MONEY -

Answer 18

SINCE MONEY IS THE MOST GENERALLY ACCEPTED, IT IS THE MOST LIQUID. IT INCLUDES - CURRENCY, COINS, BANK DEPOSITS

Question 19

WHAT IS LIQUIDITY

Answer 19

THE SPEED AND CERTAINTY WITH WHICH ASSETS CAN BE CONVERTED INTO MONEY

Question 20

NEAR MONEY

Answer 20

FINANCIAL ASSETS ARE NOT AS LIQUID AS MONEY BUT CAN BE CONVERTED IN TIMES OF NEED. THEY CANT BE USED TO BUY STUFF BUT CAN BE CONVERTED. EXAMPLE - BONDS, FIXED DEPOSITS

Question 21

NARROW DEFINITION OF MONEY

Answer 21

ONLY INCLUDES THINGS THAT FUNCTION AS MONEY - CURRENCY, NOTES, COINS, CREDIT MONEY
M1 AND M2

Question 22

BROADER DEFINITION OF MONEY

Answer 22

INCLUDES MONEY + TIME DEPOSITS IN BANKS AND POST OFFICES. M3 AND M4
INCLUDED NEAR MONEY

Question 23

WHAT IS NON-LEGAL TENDER MONEY? WHAT IS IT ALSO KNOWN AS?

Answer 23

NON LEGAL TENDER MONEY INCLUDES MONEY THAT IS GENERALLY ACCEPTED BUT IS NOT LEGAL, THEREFORE IT MAY NOT BE ACCEPTED. EXAMPLE - CHEQUES, BANK DRAFTS. IT IS ALSO KNOWN AS OPTIONAL MONEY

Question 24

WHAT IS INcluded IN DEMAND DEPOSITS AND WHAT IS NOT?

Answer 24

DEMAND DEPOSITS = INCLUDES CURRENT ACCOUNT + saving account deposits. IT EXCLUDES INTERBANK DEPOSITS AND NET TIME DEPOSITS

Question 25

WHAT IS HIGH POWERED MONEY

Answer 25

HIGH-POWERED MONEY INCLUDES CURRENCY WITH THE PUBLIC AND RESERVES WITH THE BANK.

Question 26

WHAT ARE THE PRIMARY FUNCTIONS OF MONEY?

Answer 26

1. MEDIUM OF EXCHANGE - REMOVED PROBLEM OF DOUBLE COINCIDENCE OF WANTS. MADE BUYING AND SELLING INDEPENDENT OF EACH OTHER.