Money And Interest Rate

Question 1

What is money?

Answer 1

Money is anything that is generally accepted as a medium of payment in a modern exchange economy

Question 2

Requirements of money

Answer 2

• money must be equally recognized
• it must be homogeneous
• money must be divisible into smaller units
• it must be portable so that it does not involve cost in carrying
• it must be durable
• it must be free from forgery

Nb currency in circulation is also universally accepted as money so they are part of the money stock, demand deposits are also universally accepted
Also near money is the term given to assets who can be readily used for the store of value function and can fulfill the medium of exchange function

Question 3

Functions of money

Answer 3

-as a medium of exchange
-as a unit of account (measure of value )
-as a store of wealth
-as a standard of deferred payment
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Question 4

Requirements of money

Answer 4

• money must be equally recognized
• it must be homogeneous
• money must be divisible into smaller units
• it must be portable so that it does not involve cost in carrying
• it must be durable
• it must be free from forgery

Nb currency in circulation is also universally accepted as money so they are part of the money stock, demand deposits are also universally accepted
Also near money is the term given to assets who can be readily used for the store of value function and can fulfill the medium of exchange function

Question 5

Functions of money

Answer 5

-as a medium of exchange
-as a unit of account (measure of value )
-as a store of wealth
-as a standard of deferred payment
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