The question asks to identify the primary functions of money. Money serves several roles in an economy, which are broadly categorized into primary (or main) and secondary (or derived/contingent) functions. Understanding these classifications is key to answering the question.
B) Medium of exchange and measure of value (unit of account)
These are the two fundamental and essential functions that money performs. As a medium of exchange, money eliminates the need for barter and facilitates transactions. As a measure of value (or unit of account), it provides a common standard for expressing the prices of goods and services, making economic calculations and comparisons possible.
A) Store of value and standard of deferred payment — These are considered secondary functions of money. While money can store value over time and serve as a basis for future payments, these functions are derived from its primary roles and are not as fundamental as being a medium of exchange or a unit of account.
C) Transfer of value and distribution of national income — "Transfer of value" is a consequence of money's role as a medium of exchange, allowing wealth to be moved. "Distribution of national income" is a macroeconomic concept related to how income is shared among factors of production, not a direct function of money itself.
D) Liquidity and credit creation — "Liquidity" is a characteristic of money (its ease of convertibility into other assets), not a function. "Credit creation" is a function primarily performed by commercial banks in a fractional reserve banking system, facilitated by money, but not a primary function of money itself.
This question tests the fundamental economic concept of inflation and its effect on the purchasing power of money. A general rise in the price level is known as inflation, and it directly impacts how much goods and services one unit of currency can buy.
Correct Option: C) Decreased. A general rise in the price level (inflation) means that each unit of currency buys fewer goods and services than before, hence the purchasing power or value of money has decreased.
The question asks to identify an asset that functions as a store of value but lacks the universal acceptability and easy convertibility of money. We need to evaluate each option based on these characteristics.
Correct Option: C) Gold and landed property — Gold and landed property are considered excellent stores of value because their value tends to be stable or appreciate over time. However, they are not universally accepted as a medium of exchange for daily transactions, and converting them into cash (liquidity) is not as immediate or easy as converting currency or demand deposits. Selling property or significant amounts of gold involves legal processes, finding buyers, and often incurs transaction costs and time delays.
The question asks for the economic term that describes the rate at which a unit of money changes hands over a specific period. This concept is fundamental to understanding how actively money circulates within an economy and its impact on economic activity.
Correct Option: C) Velocity of circulation of money
The velocity of circulation of money (often denoted as \(V\)) is a measure of the rate at which money is exchanged from one transaction to another. It is typically calculated as the ratio of the nominal GDP to the money supply (\(M\)):
\[ V = \frac{\text{Nominal GDP}}{\text{Money Supply}} \]The question asks for the primary mode of financial transactions in a 'cashless society'. We need to understand the definition and characteristics of a cashless society to identify the correct option.
Correct Option: C) Transfer of digital information (electronic representation of money)
In a cashless society, money is primarily represented and transferred electronically. This includes transactions made via credit/debit cards, mobile payment apps, online banking, and other digital platforms where funds are moved as data rather than physical currency.
The question asks to identify the Indian initiative that promotes financial inclusion and a move towards a cashless economy. We need to evaluate each option based on its primary objective and impact on the financial system.
A) Jan Dhan accounts and Aadhaar enabled payment systems are directly associated with promoting greater financial inclusion by providing banking access to the unbanked and facilitating digital transactions, thereby moving towards a cashless economy.