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Intermediate Part II

Money Important Short Questions


Q.1:     Define money in the words of Professor Crowther.

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

Q.2:     What is meant by metallic money?

Ans:     A kind of money that is made of some metal for example gold, silver or copper is called metallic money.

Q.3:     What is meant by standard metallic money?

Ans:     A kind of money whose face value is equal to its intrinsic value is called standard metallic money such money is also called full-bodied money.

Q.4:     What is meant by token money?

Ans:     Metallic money whose face value is greater than its interest intrinsic value.

Q.5:     What is meant by paper money?

Ans:     Paper money means notes made of paper which are issued by the government or by the central bank of the country these notes are legal tender money.

Q.6:     What is meant by convertible paper money?

Ans:     The paper money which can be converted in standard metallic money for example gold or silver or in foreign exchange on demand is called convertible paper money.

Q.7:     What is meant by inconvertible money?

Ans:     These are the notes that cannot be converted in gold or silver or foreign exchange. But these notes are legal tender money, so all the people are bound to accept them as medium of exchange.

Q.8:     Define legal tender money.

Ans:     Legal tender money means the money which is legally accepted. The people of the country are bound to accept it.

Q.9:     Explain Limited legal tender money?

Ans:     The kind of money in which payment can be made only to a certain limit is called Limited legal tender money.

Q.10:   Explain unlimited legal tender.

Ans:     The kind of money which has no specific limit to be accepted by the people whatever amount of this kind of money maybe it is accepted by everyone and no one can refuse it.

Q.11:   What is meant by Near money?

Ans:     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 for example saving deposits, time deposits, government securities and bonds etc.

Q.12:   What is meant by money of account?

Ans:     It means the unit of money by which the value of goods and services is express.

Q.13:   What is meant by barter system?

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

Q.14:   Write down the difficulties of barter system.

Ans:     1) lack of double coincidence of wants

2) lack of a common measure of value

3) lack of store of value

4) difficulty in transfer of wealth

Q.15:   Write the functions of money.

Ans:     1) medium of exchange

2) common measure of value

3) store of value

4) standard for future payments

5) transfer of value

Q.16:   Write down the characteristics of good money.

Ans:     1) General acceptability

2) Recognizability

3) Convertibility

4) Durability

Q.17:   Write down the advantages of paper money.

Ans:     1) Saving of metals

2) Saving of coinage

3) No fall in the value

4) Easy transferability

5) Elastic supply

Q.18:   Write down the disadvantages of paper money.

Ans:     1) Unstable value

2) Possibility of inflation

3) Difficulty in foreign payments

4) Dangerous fake currency

Q.19:   What is meant by credit money?

Ans:     It is a kind of money which has no legal cover but circulates in the country just because of trust or belief. Cheques, Bank draft, Credit cards and bill of exchange etc.

Q.20:   Write down advantages of credit money.

Ans:     1) Saving of metals

2) Easy transferability of money

3) Promotion of trade

4) Easy payment

Q.21:   Write down the disadvantages of credit money.

Ans:     1) Rising of inflation

2) Unnecessary consumption of wealth

3) Establishment of monopolies

Q.22:   Write down components of the supply of money.

Ans:     Coins, Currency notes and credit money.

Q.23:   Write the main sources of supply of money.

Ans:     1) Individual savings

2) Public savings

3) Corporate savings

4) Insurance Company

Q.24:   Define demand for money according to professor Keynes.

Ans:     Quantity of money which people prefer to hold in the form of cash is called demand for money.

Q.25:   State motives of demand for money.

Ans:     1) Transaction motive

2) Precautionary motive

3) Speculative motive

Q.26:   Write main instruments of credit money.

Ans:     Promissory notes, Cheques, and bill of exchange, etc.

Q.27:   Write kinds of money.

Ans:     1) Metallic money

  1. a) Standard metallic money
  2. b) Token metallic money

2) Paper money

  1. a) Convertible paper money
  2. b) Inconvertible paper money

3) Credit money

4) Legal tender money

  1. a) Limited legal tender money
  2. b) Unlimited legal tender money

5) Near money

6) Money of account

7) Foreign exchange

Q.28:   Write down the fisher equation of exchange.

Ans:    MV=PY

Q.29:   Write down assumptions of the quantity theory of money.

Ans:     1) Quantity of goods should not be changed

2) Velocity of circulation of money should not change

3) Quantity of barter trade should not change

4) Quantity of credit money should not change

Q.30:   Write down factors that bring change in the value of money.

Ans:     1) Change in quantity of money

2) Change in the production

3) Change in velocity of money

4) Change in growth rate of population

Q.31:   Write down stages of evolution of money.

Ans:     1) Commodity money

2) Metallic money

3) Paper money

4) Credit money

Q.32:   What is meant by Cheque?

Ans:     Cheque is a polite order by a depositor to his bank for paying the amount stated on the Cheque to the presenter of Cheque.

Q.33:   What is bearer Cheque?

Ans:     Anybody holding the bearer Cheque can receive from the bank the amount of money written on the Cheque.

Q.34:   What is an order Cheque?

Ans:     When the depositor writes the name on the cheque to whom the payment is to be made and deletes the word bear the cheque become and order cheque.

Q.35:   What is meant by cross cheque?

Ans:     When on the left upper corner of an order cheque two parallel lines are drawn that cheque become a cross cheque.

Q.36:   What is a bank draft?

Ans:     Bank draft is a document on which a branch of a bank order to another branch to pay the amount of money written on it to the person in whose favour the draft is issued.

Q.37:   Define the value of money.

Ans:     Value of money means the purchasing power of money. it means the quantity of goods which can be purchased in exchange of one unit of money.



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