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12 Questions

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Money Supply Determination in Economy

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Questions and Answers

What can deficit financing help developing economies with?

Making up the deficiency of resources (correct)

Increasing unemployment

Reducing inflation

Encouraging foreign investment

How does an increase in money supply impact economic growth according to the text?

Has no effect on economic growth

Reduces economic growth

Can accelerate economic growth within proper limits (correct)

Always leads to runaway inflation

Why is it important to manage money supply according to the text?

To accelerate economic growth

To decrease national income

To discourage deficit financing

To prevent runaway inflation (correct)

What does the term 'money supply' refer to?

Total stock of monetary media of exchange available to a society Signup and view all the answers

Why are the cash reserves held by the Government and banks excluded from the standard measures of money supply?

They are used for transaction and speculative purposes Signup and view all the answers

What is the rationale behind considering money supply as held by the public?

To separate producers of money from users of money Signup and view all the answers

What is the primary role of money supply in an economy according to the passage?

To determine the price level and interest rate Signup and view all the answers

What are the main factors that determine the money supply in an economy?

The public, commercial banks, Central Bank, and Government Signup and view all the answers

What are the various measures of money supply discussed in the passage?

The passage does not discuss the various measures of money supply Signup and view all the answers

Why is the growth of money supply important according to the passage?

Both (a) and (b) Signup and view all the answers

What is the objective that requires controlled expansion of money supply according to the passage?

Development with stability Signup and view all the answers

What type of inflation is mentioned in the passage as potentially stimulating investment?

Mild inflation arising from deficit financing Signup and view all the answers