Justify the following statements with valid arguments : (a) The Central Bank is the sole currency issuing authority of an economy. (b) Money serves as a measure of standard of deferred payments.

Question

Accepted Answer

(a) Central Bank is the sole currency issuing authority:

Justification:
1. Central bank has monopoly on currency issue
2. It controls money supply in economy
3. Ensures stability of currency value
4. Manages foreign exchange reserves
5. Acts as banker to government

(b) Money serves as measure of standard of deferred payments:

Justification:
1. Money provides a common unit for measuring debt
2. Future payments can be expressed in money terms
3. Loans and borrowings are denominated in money
4. Interest payments are calculated in money
5. Enables credit system to function

Both functions are essential for a modern economy to function smoothly.