Chapter 5R, Problem 9MCQ

To determine

The correct option that defines the desirable characteristics of money.

Answer to Problem 9MCQ

Option d is correct.

Explanation of Solution

Explanation for the correct option:

d.

Money should be widely accepted so that users can use it for a variety of purposes. This is the desirable characteristic of money that provides essential benefits to money users. Therefore, option d is correct.

Explanation for incorrect options:

a.

There is no fixed supply of money instead it has a limited supply. Therefore, option a is incorrect.

b.

Denominations of money mean the type of notes that has been used in the financial market issued by the government. Large-denomination is not a desirable characteristic of money. Therefore, option b is incorrect.

c.

Money should have a value that can be used for an exchange instead it is not desirable that it should be made up of a precious metal. Therefore, option c is incorrect.

e.

Backed by commodities is a type of money instead of its characteristics. This type of money possesses no intrinsic value but its value is defined by the promise made by the party for the conversion of the money into valuable goods. Therefore, option e is incorrect.

Economics Concept Introduction

Financial system: Financial system refers to the system that facilitates the borrower to borrow capital and the investors to invest their savings in the financial market.

Characteristics of money: Main characteristics of money refer to the traits that money should possess which include durability, being portable, divisible, uniformity, acceptable, and having a limited supply.