27. In an economy without government or trade, it must be true that a. savings e

Question

27. In an economy without government or trade, it must be true that a. savings equals investment. b. consumption equals savings plus investment. c. consumption plus savings equal investment. d. consumption plus investment equal national savings 28. Bartering is: a. very efficient compared to using money. b.slightly inefficient compared to using money. c. just as efficient as using money d. extremely inefficient compared to using money. 29. Fiat money is: a. any form of money that can be legally exchanged into a fixed amount of an underlying commodity. b.money created by rule. c. money used for the exchange of large commodities. d. None of these is true. 0 Banks create money in the economy by: a. loaning out part of each deposit, which will be redeposited by someone else. b. charging higher interest on loans than savings. c. charging higher interest on savings than loans d. Only the government can create money

Explanation / Answer

Answer : 27) The correct option is a.

Because in case of closed economy without government, Income (Y) = Consumption + Saving; and Expenditure (Y) = Consumption + Investment. As income is used for expenditure, hence income (Y) = Expenditure (Y). As a part of income is used as savings and as investment made from savings which is the part of expenditure, hence savings = investment.

28) The correct option is d.

Because in case of money a person can spent the money on his/her personal choice able goods and services. Whereas in case of bartering only one good and service is exchanged in terms of other one good and service. But if the value of one good and service is higher than the value of other one good and service then bartering does not occur. This means that money has greater efficiency in comparison to using bartering system.

29) The correct option is b.

Because according to the central bank rule, fiat money can not bring any intrinsic value of physical commodities like gold and silver but yet it has value and is used as a medium of exchange as government decided it. Paper money and coins are known as fiat money.

30) The correct option is a.

Because if bank get a new deposit then bank keep a part of that deposit as reserve and other part of that deposit use to provide loans to other person. The person invest this loan able amount to make somethings like house building. The house builder now gets money as income and save into his own bank account. Again this new deposit by house builder will be used as loan through his bank after keeping reserve amount on bank's hand and again this loan will be redeposited by third person on his own bank account and so on. Thus bank expand money usation or "create money in the economy".

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.