ECONOMICS
MONEY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Money increases economic efficiency because it is costless to produce.
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Money increases economic efficiency because it discourages specialization.
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Money increases economic efficiency because it decreases transaction costs.
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Money cannot have an effect on economic efficiency.
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Detailed explanation-1: -Money avoids the double coincidence of wants and allows for more specialization and productive efficiency. Therefore money allows us to use our limited resources wisely and produce MORE with the same amount of resources. this helps to reduce scarcity.
Detailed explanation-2: -Maximizing benefits and minimizing costs.
Detailed explanation-3: -Lastly, money acts as store of value. Money being the most liquid of all assets is a convenient form in which to store wealth, that is, money can be held as an asset. Thus store of value function is also called asset function of money.
Detailed explanation-4: -Efficiency is reduced when a given amount of productive resources can produce less output. This could be done by reducing the amount of resources, such as laws that encourage law suits because this reduces the amount of resources that are used in actual production.