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Economics · 2025 · 6 marks
CBSE 2025 · Region 5 · Set 1 · Q16
(a)“In a country, routine economic operations rely on a stable medium, to facilitate transactions for maintaining smooth economic activities.”Discuss briefly the indicated function of money.(b)State the meaning and components of M$\displaystyle _1$ measure of money supply.(c)State the formula to compute Credit Multiplier.
(a)
“In a country, routine economic operations rely on a stable medium, to facilitate transactions for maintaining smooth economic activities.”
Discuss briefly the indicated function of money.
(b)
State the meaning and components of M$\displaystyle _1$ measure of money supply.
(c)
State the formula to compute Credit Multiplier.
Marking-scheme solution
(a)
The indicated function of money is ‘medium of exchange’.
Money acts as a universally acceptable medium for any transaction. Money serves as a medium for buying/selling goods and services. It eliminates the limitation of lack of double coincidence of wants by facilitating exchange in the market.
(b)
M$\displaystyle _1$ measure of money supply refers to the total volume of money held by the public at a particular point of time in the economy.
The two components of M$\displaystyle _1$ measure of money supply are:
Currency (notes and coins) held by the public.
Net demand deposits held by commercial banks.
(c)
Credit Multiplier = $\displaystyle \dfrac{1}{\text{Reserve Ratio}}$
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CBSE Class 12 Economics past-paper question from the 2025board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.