ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Limited supply. In order to maintain its value, money must have a limited supply. While the supply of cows is fairly limited, if they were used as money, you can bet ranchers would do their best to increase the supply of cows, which would decrease their value.

Detailed explanation-2: -To summarize, the money supply is important because if the money supply grows at a faster rate than the economy’s ability to produce goods and services, then inflation will result. Also, a money supply that does not grow fast enough can lead to decreases in production, leading to increases in unemployment.

Detailed explanation-3: -The resources that we value-time, money, labor, tools, land, and raw materials-exist in limited supply. There are simply never enough resources to meet all our needs and desires. This condition is known as scarcity.

Detailed explanation-4: -When the supply of money in an economy is too high, it can lead to inflation. Inflation means the amount of money needed to buy a good or service increases-therefore money becomes less valuable, and the same amount of money can buy less over time than it could in the past.