Question 1

What is the main function of money in an economy?

Accepted Answer

Money acts as a medium of exchange. It eliminates the need for the double coincidence of wants, which was the major drawback of the barter system, making transactions smooth and efficient.

Question 2

Which of the following is modern form of money?

Accepted Answer

Paper notes and coins are modern forms of money. Unlike precious metals, they are not made of gold, silver, or copper, and unlike things used as money in early times, they are not use-everyday goods.

Question 3

Who issues currency notes in India on behalf of the Central Government?

Accepted Answer

The Reserve Bank of India (RBI) issues currency notes on behalf of the central government in India as per Indian law.

Question 4

What do people hold with banks as deposits?

Accepted Answer

People hold extra cash as deposits with banks. Banks accept these deposits and also pay an interest rate on the deposits.

Question 5

What are deposits in bank accounts that can be withdrawn on demand called?

Accepted Answer

Deposits in bank accounts that can be withdrawn on demand are called demand deposits.

Economics: Money and Credit