Question

It is necessary for a monetary unit to have an intrinsic value as a commodity to be accepted as a medium of exchange. True of False

The household sector is typically a net lender (or supplier) of funds in the financial marketplace. True or False

Answer 1

It is necessary for a monetary unit to have an intrinsic value as a commodity to be accepted as a medium of exchange

Answer : FALSE

There are two types of money; Commodity money and Fiat money. Both are accepted as a medium of exchange. Commodity money is used as money and has an intrinsic value as a commodity. But Fiat money has no intrinsic value. But Fiat money is approved by the government to be legal tender money. It cannot be converted into a valuable commodity. Thus given statement is FALSE, intrinsic value of monetary unit is not necessary.

The household sector is typically a net lender (or supplier) of funds in the financial marketplace.

Answer : TRUE

Households, business firms, foreign companies and government participate in the financial market. Households are major suppliers in the market through their personal savings and borrowers also. Business firms and governments also lend as well as borrow funds. And thus, they participate in the market from both sides. The supply of loanable funds come from personal savings, foreign funds and bank loans. In the case of households, the personal savings exceeds the household credit. Thus the households becomes the net lender or supplier of funds in the financial marketplace.