Money, Banking & Finance

Question 1

What are the functions of Money?

Answer 1

Medium of Exchange
Store of Value
Unit of Account

Question 2

What are the types of Money?

Answer 2

Commodity Money
Fiat Money
Credit Money

Question 3

How do Commercial Banks make Profit?

Answer 3

Government Bonds
Portfolio of Loans
Interest Rate Spread
Fees and Commissions

Question 4

What are constraints of money creation by Banks?

Answer 4

Self Imposed Limits
Limits in AD for New Loans
Monetary Policy

Question 5

What are functions of finance?

Answer 5

• Provision of money to support investment In real capital.
• Portfolio Investment
• Banks provide insurance instruments

Question 6

Is too much finance bad for the economy?

Answer 6

When economies grow on the basis of mass investment in assets with questionable foundations, the growth is unstable and destined to be of short duration
Such irrational speculative price rises are called bubbles
Classic examples include the stock market bubble of 1929.