Question:
What is meant by ‘the value of money’?
(1) The amount of goods and services that can be purchased with a given amount of money
(2) The amount of wealth stored in the form of money
(3) The amount of gold reserves kept at the Central Bank
(4) The cost of production of coins and notes
(5) The opportunity cost of holding wealth in the form of money
Correct Answer:
(1)
Answer Explanation:
The “value of money” strictly refers to its purchasing power. It is determined by the actual quantity of real goods and services that one unit of currency can buy in the market, which is inversely related to the general price level (inflation).
Topic: Money and Banking Year: 2017
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