WAEC Economics 2020 Theory — Question 6

Model answer

(a) Money can be defined as any medium of exchange that is generally acceptable and backed by law. Money can also refer to any documents that serve as a medium of exchange and that is generally acceptable. (b)(i) Value of money: this is the purchasing power of money. It is measured by the quantity of goods which a money can be exchanged for. (ii) Demand for money: this can be defined as the tendency or propensity of people to hold cash. It refers to the volume of asset which people will prefer to hold as cash. (c) Factors that determine transactionary demand for money (any four): i. the level of income of the individual. ii. the number of dependents of the individual. iii. investment opportunity that is available. iv. the level of credit facilities available.