Precautionary motive for holding money is to
Meet daily and regular transactions
Take advantage of changes in the prices of goods and services
Cover unforeseen events
Cover expenses on house rent
Correct answer is C
Precautionary motive: A desire to hold cash in order to be able to deal effectively with unexpected events that require cash outlay.
Which of the following functions of money is mostly affected during inflation?
Medium of exchange
Unit of Account
Store of value
Standard of deferred payment
Correct answer is C
Inflation erodes the value of money; it does not keep its value. Something that costs a certain amount today will cost more tomorrow. This affects everything from the timing of transactions to the amount required for future payments (interest rates).
Merchant Bank
Development Bank
Central Bank
Insurance Company
Correct answer is A
Merchant Bank: a bank dealing in commercial loans and investment.
International trade is desirable because it
May lead to overproduction
Brings about over-dependence of countries on one another
Provides foreign market for local goods
Brings about unhealthy competition and rivalries
Correct answer is C
International trade allows countries, states, brands, and businesses to buy and sell in foreign markets. This trade diversifies the products and services that various countries offer thereby providing an international market for local goods.
The likely implication of the devaluation of a country's currency is that
Exports of such a country become cheaper
Importation of goods into such a country becomes cheaper
The value of such a country's currency rises
Foreign goods are attracted into the country
Correct answer is A
The devaluation or depreciation of currency tends to raise the price level in the country and thus increase the rate of inflation. This causes the exports of goods to increase and reduces the supply and availability of goods in the domestic market which tends to raise the domestic price level.