Critical Thinking Questions: Meaning and Functions of Money

Table of Contents
1. Type I
2. Type II
3. Type III
4. Type IV
5. Type V
6. Type VI
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Type I

Q1: Money is best defined as:
(a) Anything that has intrinsic value
(b) Anything accepted by law as legal tender
(c) Anything generally accepted as a medium of exchange
(d) Anything issued only by banks

Q2: Which of the following is the primary function of money?
(a) Store of value
(b) Medium of exchange
(c) Standard of deferred payments
(d) Measure of utility

Q3: Which feature of money helps eliminate the difficulties of the barter system?
(a) Divisibility
(b) Portability
(c) General acceptability
(d) Durability

Type II

Q4: Which of the following difficulties of barter are solved by money?
A. Lack of double coincidence of wants
B. Difficulty in storing wealth
C. Indivisibility of goods
D. Absence of a common measure of value
(a) A, B and D
(b) A, C and D
(c) B, C and D
(d) A, B, C and D

Q5: Identify the correct statements regarding money as a measure of value:
A. It expresses the value of goods in prices
B. It allows comparison between goods
C. It eliminates the need for money
D. It is also called unit of account
(a) A, B and D
(b) B and C
(c) A and C
(d) C and D

Q6: Which of the following are secondary functions of money?
A. Medium of exchange
B. Store of value
C. Standard of deferred payments
D. Transfer of value
(a) A and B
(b) B, C and D
(c) A and C
(d) A, B and D

Type III 

Analogy Based

Q7: Money : Medium of Exchange : : Price :
(a) Store of value
(b) Measure of value
(c) Deferred payment
(d) Barter

Q8: Savings : Store of Value : : Loan Repayment :
(a) Medium of exchange
(b) Measure of value
(c) Standard of deferred payments
(d) Transfer of value

Q9: Gold Coins : Commodity Money : : Paper Currency :
(a) Fiat money
(b) Credit money
(c) Legal tender
(d) Metallic money

Type IV 

Assertion-Reason

Q10: (A) Money acts as a standard of deferred payments.
(B) Future payments can be made in terms of money with certainty.
(a) (B) contradicts (A)
(b) (B) is the reason for (A)
(c) (A) is true but (B) is false
(d) (A) and (B) are independent

Q11: (A) Money removes the problem of double coincidence of wants.
(B) Money must have intrinsic value to perform this function.
(a) (B) contradicts (A)
(b) (B) is the reason for (A)
(c) (A) is true but (B) is false
(d) (A) and (B) are independent

Q12: (A) Money acts as a store of value.
(B) Inflation reduces the effectiveness of money as a store of value.
(a) (B) contradicts (A)
(b) (B) is the reason for (A)
(c) (A) is true but (B) is false
(d) (A) and (B) are independent

Type V 

Application-Based

Q13: Paying school fees, buying groceries, and paying bus fare best illustrate money as:
(a) Store of value
(b) Medium of exchange
(c) Standard of deferred payments
(d) Transfer of value

Q14: A worker saves part of his salary to use during retirement. This reflects money as:
(a) Medium of exchange
(b) Measure of value
(c) Store of value
(d) Unit of account

Q15: A loan agreement specifies repayment after five years in rupees. This highlights money as:
(a) Medium of exchange
(b) Standard of deferred payments
(c) Store of value
(d) Measure of value

Type VI

Odd One Out / Incorrect Statement

Q16: Identify the odd one out related to functions of money:
(a) Medium of exchange
(b) Store of value
(c) Measure of value
(d) Medium of production

Q17: Which of the following is not a characteristic of good money?
(a) Durability
(b) Portability
(c) Perishability
(d) Divisibility

Q18: Identify the incorrect statement about money as a measure of value:
(a) It expresses value in terms of prices
(b) It enables comparison of goods
(c) It requires barter to function
(d) It acts as a unit of account

Q19: Which function of money helps in shifting purchasing power from one person to another?
(a) Store of value
(b) Medium of exchange
(c) Transfer of value
(d) Standard of deferred payments

Q20: Money fails to act effectively as a store of value during:
(a) Stable prices
(b) Economic growth
(c) Inflation
(d) Increased savings