Q27. Trading in a barter economy requires a. money b. a double coincidence of wa
ID: 1213175 • Letter: Q
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Q27. Trading in a barter economy requires a. money b. a double coincidence of wants c. equal sharing of assets d. all people to be farmers Q28. In a price index, the quantity of goods and services being measured between two periods a. must be increased b. must be held constant c. must be decreased d. should be increased or decreased Q29. The U. S. money supply measure that consists of currency plus travelers checks and checkable deposits is referred to as a. M1 b. M2 c. M3 d. M1 + M2 Q30. The higher the reserve requirement, a. the more the money supply can expand b. the more interest the bank will earn on its reserve account c. the less the money supply can expand d. both the more the money supply can expand and the more interest the bank will earn on its reserve account Q31. The interest rate at which commercial banks lend to their customers with the best collateral is known as a. prime rate b. federal funds rate c. discount rate d. T-bill rateExplanation / Answer
Question 27. It is related with barter economy. It is a system where goods are exchaged for goods. Price is a common medium of exchage. It does not exist in barter economy. So option (a) money is not correct.
In barter two commodities are directly exchanged between two parties. Suppose A has rice. It wants wheat. B has wheat. He wants Rice. Here barter exchange will occur only when two parties have wants for other partys product. Thus option (b) stating double coicidence of want is true.
It is not necessary that each party will exchange equal quantity. Thus option (c) is not correct.
Finally all people in barter exchange need not be a firmer. So statement (d) is not correct.
Answer: Option (b) is correct.
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Q.28: Price index is a statistical device. It is used to show relative change in price between two periods. Price of a period is compared with price of base period. In calculating this index, quantities of commodities in base period and current period will be taken the same. Otherwise you will not be able to judge exact impact of price change.
Answer: Thus option (b) is correct which states that quatity of goods and services of two periods must be held constant.
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Q.29: In USA supply of money is grouped as M1,M2 and M3. Most liquid items are included in M1. It includes currency, travellers check and checkable deposits.
So option (a) is correct.
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Q.30: Reserve requirement is an element of monetary policy. In this policy supply of money is increased and decreased to create an impact on the economy. One of the instrument in monetary policy is to vary reserve ratio. As per federal guideline, every bank has to statutorily maintain a certain percentage of time and demand deposit as reserve. Amount left after satisfying this reserve requirement, is distributed as loan. So with the rise in compulsory reserve ratio, lending capacity of bank will decline. So less expansion of money supply will take place.
Thus option (c) is correct. With the rise in reserve requirement, less money supply will expand in the economy.
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Q.31. The intererst rate at which commercial banks lend to the customers with best collateral is known as Prime rate. Such parties are known as most priviledged party.
Thus correct option (a) is correct.
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