ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -There have been many forms of money in history, but some forms have worked better than others because they have characteristics that make them more useful. The characteristics of money are durability, portability, divisibility, uniformity, limited supply, and acceptability.

Detailed explanation-2: -A nominal anchor is a variable policymakers can use to tie down the price level. One nominal anchor central banks used in the past was a currency peg-which linked the value of the domestic currency to the value of the currency of a low-inflation country.

Detailed explanation-3: -in fact, a variety of items have been used as money over the centuries. The items that worked the best tended to have four basic characteristics: portability, divisibility, durability, and acceptability.

Detailed explanation-4: -When the Federal Reserve increases the money supply, inflation may occur. More often than not, if the Fed is attempting to stimulate the economy by growing the money supply, prices will increase, the cost of goods will be unstable, and inflation will likely occur.