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Explain role of money in developing and mixed economy?
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Explain role of money in developing and mixed economy?
The Role of Money in Developing and Mixed Economy

Money plays a crucial role in both developing and mixed economies as it facilitates economic transactions, promotes economic growth, and helps in the efficient allocation of resources. Let us delve into the details of the role of money in these types of economies.

1. Medium of Exchange:
Money serves as a medium of exchange, enabling the smooth facilitation of transactions. In developing and mixed economies, where barter systems are less prevalent, money is essential for buying and selling goods and services. It simplifies trade by providing a universally accepted means of payment.

2. Store of Value:
Money acts as a store of value, allowing individuals and businesses to accumulate wealth over time. In developing economies, where formal banking services may be limited, money provides a secure asset that can be stored and accessed easily. It helps in preserving the value of wealth and provides financial security.

3. Unit of Account:
Money serves as a unit of account, providing a common standard for measuring the value of goods, services, and assets. It enables individuals and businesses to compare and evaluate different products and make informed decisions. Money facilitates price determination and helps in efficient resource allocation.

4. Means of Deferred Payment:
Money allows for deferred payment, which is crucial for economic growth and development. It enables individuals and businesses to borrow and lend, invest in productive activities, and undertake long-term projects. Money acts as a medium for credit, promoting investment and entrepreneurship.

5. Facilitates Economic Growth:
Money plays a vital role in stimulating economic growth by providing the necessary liquidity for investment and consumption. In developing economies, access to credit and financial services is crucial for entrepreneurs and businesses to expand their operations, create jobs, and contribute to overall economic development.

6. Financial Intermediation:
Money facilitates financial intermediation by enabling banks and other financial institutions to mobilize savings and channel them towards productive investments. In mixed economies, financial intermediaries play a significant role in allocating resources efficiently and promoting economic stability.

7. Monetary Policy:
Money is central to the implementation of monetary policy by central banks. They regulate the money supply, interest rates, and exchange rates to control inflation, stabilize the economy, and promote sustainable growth. Monetary policy tools, such as open market operations and reserve requirements, are used to manage the money supply and influence economic conditions.

In conclusion, money plays a multifaceted role in both developing and mixed economies. It serves as a medium of exchange, store of value, unit of account, and means of deferred payment. Money facilitates economic growth, financial intermediation, and the implementation of monetary policy. Understanding the role of money is crucial for policymakers, economists, and individuals to make informed decisions and promote sustainable economic development.
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Explain role of money in developing and mixed economy?
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Passage 2After the end of World War II, a pervasive, but unfortunately fallacious, economic perspective took hold. Based on the United States successful emergence from the Depression, the idea that war was good for an economy became fashionable. However, linking the United States economic recovery with its entry into World War II is a prime example offlawed economic thinking.Supporters of the war benefits economy theory hold that a country at war is a country with a booming economy. Industry must produce weapons, supplies, food, and clothing for the troops. The increased production necessitates the hiring of more people, reducing unemployment. More employment means more money in the pockets of citizens, who are then likely to go out and spend that money, helping the retail sector of the economy. Retail shops experience an increase in business and may need to hire more workers, further reducing unemployment and adding to the economic momentum. While this scenario sounds good in theory, it does not accurately represent what truly happens in a war time economy.In reality, the government can fund a war in a combination of three ways. It can raise taxes, cut spending on other areas, or increase the national debt. Each of these strategies has a negative impact on the economy. An increase in taxes takes money out of an individuals hands, leading to a reduction in consumer spending.Clearly, there is no net benefit to the economy in that case. Cutting spending in other areas has its costs as well, even if they are not as obvious.Any reduction in government spending means the imposition of a greater burden on the benefactors of that government spending. Cutbacks in a particular program mean that the people who normally depend on that program now must spend more of their money to make up for the government cuts. This also takes money out of consumers hands and leaves the economy depressed. Of course, a government could go into debt during the war, but such a strategy simply means that at some point in the future, taxes must be increased or spending decreased. Plus, the interest on the debt must be paid as well.Q. The second paragraph of the passage performs which of the following functions?

Passage 2After the end of World War II, a pervasive, but unfortunately fallacious, economic perspective took hold. Based on the United States successful emergence from the Depression, the idea that war was good for an economy became fashionable. However, linking the United States economic recovery with its entry into World War II is a prime example offlawed economic thinking.Supporters of the war benefits economy theory hold that a country at war is a country with a booming economy. Industry must produce weapons, supplies, food, and clothing for the troops. The increased production necessitates the hiring of more people, reducing unemployment. More employment means more money in the pockets of citizens, who are then likely to go out and spend that money, helping the retail sector of the economy. Retail shops experience an increase in business and may need to hire more workers, further reducing unemployment and adding to the economic momentum. While this scenario sounds good in theory, it does not accurately represent what truly happens in a war time economy.In reality, the government can fund a war in a combination of three ways. It can raise taxes, cut spending on other areas, or increase the national debt. Each of these strategies has a negative impact on the economy. An increase in taxes takes money out of an individuals hands, leading to a reduction in consumer spending.Clearly, there is no net benefit to the economy in that case. Cutting spending in other areas has its costs as well, even if they are not as obvious.Any reduction in government spending means the imposition of a greater burden on the benefactors of that government spending. Cutbacks in a particular program mean that the people who normally depend on that program now must spend more of their money to make up for the government cuts. This also takes money out of consumers hands and leaves the economy depressed. Of course, a government could go into debt during the war, but such a strategy simply means that at some point in the future, taxes must be increased or spending decreased. Plus, the interest on the debt must be paid as well.Q. The "pervasive...economic perspective" mentioned in line 1 took hold because

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