Chapter 11: Money
Economics Solutions for Class 12 Commerce Economics
OMTEX CLASSES
Fill in the blanks with appropriate alternatives given in the brackets.
1) Medium of exchange is __________ function of money.
(primary/secondary/contingent/ additional)
2) In the case of __________ coins, intrinsic value is less than their face value.
(token/full bodied/representative/standard)
3) The most liquid asset is __________.
(cheque/money/shares/debentures)
4) Introduction of __________ removed difficulties of barter.
(metals/bank/money/shares)
5) In the initial stage of development, __________ was used.
(credit money /paper notes/ metallic coins/commodity money)
Answer:
1) Medium of exchange is primary function of money.
Explanation:
The main function of money is to act as a medium of exchange. It facilitates exchange through a common medium i.e. facilitates exchange through currency and eliminates the need for double coincidence of wants for an exchange to take place. Therefore, it can be concluded that medium of exchange is the primary function of money.
2) In case of token coins, intrinsic value is less than their face value.
Explanation:
Intrinsic value of token coins refers to the value of the metal which a token coin is made of. On the other hand, face value is the value which is mentioned on the coin. Since token coins are made up of cheap metals, in case of token coins, the intrinsic value is less than their face value.
3) The most liquid asset is money.
Explanation:
Money is the most liquid asset. Gold, silver, land, cheques etc. are not as liquid as money. If the need arises, these assets have to be converted into money, but money does not need to be converted into any other form as it is readily acceptable.
4) Introduction of money removed difficulties of barter.
Explanation:
Barter system had many difficulties like the problem of double coincidence, common measure of value, the problem of standard method of deferred payment etc. which were solved by the introduction of money. Money has overcome the drawbacks of the barter system and serves as an effective medium of exchange to facilitate trade.
5) In the initial stage of development, commodity money was used.
Explanation:
Initially, human beings exchanged goods and services for other goods and services. In other words, commodity exchange or commodity money was more prevalent. Commodities like sea-shells, salt, gold or other precious commodities were used as money for the exchange of goods and services.