Question

Q1: Define money and explain the important functions of money?

Q2: Some economists suspect that one of the reasons that economies in developing countries grow so slowly is that they do not have well-developed financial markets. Does this argument make sense?

Q3. When interest rates fall, how might you change your economic behavior?

Q4: Why are financial markets important to the health of the economy?

Q5: When the American dollar worth more in relation to currencies of other countries, would an American be more likely to buy American-made or foreign-made jeans?

Q6. Why do Government Treasury bills have lower interest rate than large-denomination negotiable bank CDs?

Q7. Interest rates are among the most important monetary variable watched in the economy. Briefly explain why interest rate is important for the economy.

Q8. Briefly explain the meaning of the following terms:
a) Fiat Money
b) Liquidity
c) FinTech
d) Treasury Bills
e) Commercial Paper
f) Bitcoins
g) Yield Curve
h) Money Market
i) M1 and M2
j) Junk Bonds

Answer 1

1. Money is any item or verifiable system through which payment of goods and services are accepted and goods and services are exchanged for those payments.

There are various functions of money-

A.money serves as a medium of exchange and it is used to exchange various kinds of goods and services with its own form of money.

B. Money will also be acting as a store of value because various investors and savers are always storing their savings in the form of money in banks or other funds

C. Money is also used as a standard of deferred payment and it can be used to pay later also

D. Money also serves as a unit of account and it is used as a single unit for various accounts.