Finance: Money & Credit MCQ Quiz

Currency in India is issued by the Reserve Bank of India (RBI) on behalf of the central government. The RBI is the country's central banking institution and is responsible for the issue and supply of the Indian rupee. As the central bank, the RBI acts as the custodian of the currency and ensures its stability and integrity. The central government, represented by the Ministry of Finance, has the authority to determine the denominations and design of the currency, while the actual printing and distribution are carried out by the RBI.

Money acts as a medium of exchange because it is used to facilitate the buying and selling of goods and services. It serves as a common unit of value that allows individuals to trade with one another, eliminating the need for bartering or direct exchange of goods. Money acts as a universally accepted medium that enables transactions to take place efficiently and effectively.

The exchange of goods for goods is known as the barter system. In this system, there is no involvement of currency or money. Instead, people directly trade their goods or services with each other. This system was prevalent in ancient times when there was no standardized currency. However, it is not commonly used today as the use of currency has become widespread.

The problem with the barter system is the double coincidence of wants. This means that for a trade to occur, both parties involved must have something that the other party wants and vice versa. This can be difficult to achieve as it requires a perfect match of wants and needs between two individuals. Without this double coincidence, it becomes challenging to facilitate exchanges and can hinder the efficiency of the barter system.

The given statement accurately describes capitalism as an economic system where businesses are privately owned and operated by individuals rather than being controlled by the government. This system promotes free market competition and individual economic freedom, allowing individuals to make their own decisions regarding production, distribution, and consumption of goods and services. Therefore, the answer "Yes" is correct as it aligns with the definition of capitalism provided in the statement.

The phrase "What a person desires to sell is exactly what the other wishes to buy" refers to the concept of double coincidence of wants. This means that in a barter system, for a trade to occur, there must be a mutual agreement where both parties have goods or services that the other wants. It highlights the difficulty of finding a direct match between what one person wants to sell and what the other person wants to buy, emphasizing the importance of a double coincidence for a successful trade.

Adam Smith is the correct answer because he is widely regarded as the father of modern economics and the proponent of the idea of free-market. In his book "The Wealth of Nations" published in 1776, Smith advocated for a laissez-faire economic system where individuals and businesses are free to operate without government interference. He argued that this would lead to economic growth, efficiency, and overall societal welfare. Smith's ideas have had a significant influence on economic theory and policy, making him the most appropriate choice for introducing the idea of free-market.