Question

State whether the following statements are true or false.
1. Metallic coins are easily portable than paper notes.
2. Token coins are coins whose face value is greater than their intrinsic value.
3. Money facilitates estimation of national income.
4. A cheque is a fiat money.
5. Money increases productivity of capital.

Answer 1

1. The above statement is false. Metallic coins are not easily portable because large amounts of metallic coins are difficult and inconvenient to carry and transport from one place to other. On the other hand, paper notes are easily portable as these notes are light weighted and possess high face value. Hence, it is can be said that paper notes are more easily portable than metallic coins.

2. The above statement is correct. Face value of token coins is the value which is mentioned on the coin. On the other hand, intrinsic value of token coins refers to the value of the metal which a token coin is made of. Since token coins are made up of cheap metals, in case of token coins, the face value is greater than their intrinsic value.

3. The above statement is true. Money facilitates the estimation of national income as the value of all the goods and services produced in a country and all the factor payments made to factor inputs can be expressed in terms of money, which is summed-up to calculate national income.

4. The above statement is false. The currency notes and coins issued by the Reserve Bank of India (RBI) and the Government of India (GOI) are collectively called ‘Fiat Money’. Since cheques are not issued by the RBI and GOI, they are not fiat money.

5. The above statement is correct. Money increases productivity of capital. In the sense, with money, more capital can be raised. Since increased capital implies purchase of better machinaries that produce superior quality products in less time, it leads to an increase in output and thereby increases productivity of the capital.