Chapter 13: Problem 27

Each of the following is a useful property of money except (LO1) a) portability b) scarcity c) divisibility d) held only by the rich

Short Answer

Expert verified

Option d) held only by the rich is not a useful property of money, as it does not describe a characteristic or property that makes money functional and effective in the whole economy. In contrast, portability, scarcity, and divisibility are all important characteristics that make money useful and functional in an economy.

Step by step solution

Understand the properties of money

Money has specific properties that make it functional and effective in an economy. These properties are: - Portability: Easy to carry and use in transactions. - Scarcity: Limited in supply, so it maintains its value. - Divisibility: Can be divided into smaller units for different transactions. - Durability: Can withstand repeated use without wearing out - Acceptability: Widely accepted as a medium of exchange. Now, let's analyze each option in relation to these properties of money.

Analyze Option a) Portability

Portability refers to the ability of money to be easily carried and used in different transactions. This property is essential since it allows people to use money easily in their day-to-day activities. Therefore, portability is a useful property of money.

Analyze Option b) Scarcity

Scarcity is a property of money that ensures it is limited in supply. This helps maintain the value of money and prevents inflation. If money were not scarce, it would lose its value as a medium of exchange because people would have an unlimited amount of it. Consequently, scarcity is a useful property of money.

Analyze Option c) Divisibility

Divisibility is the ability of money to be divided into smaller units for different transactions. This property is crucial because it makes it possible for people to use money for various transactions, both big and small. Therefore, divisibility is a useful property of money.

Analyze Option d) Held only by the rich

This option suggests that money is useful only if it is held exclusively by a select group (the rich) in the economy. This statement does not describe a characteristic or property that makes money functional and effective in the whole economy. On the contrary, the acceptability of money by all participants in an economy is a crucial property. Therefore, option d) is not a useful property of money.

Conclusion

Based on the analysis above, option d) held only by the rich is NOT a useful property of money. The other options (portability, scarcity, and divisibility) are all important characteristics that make money useful and functional in an economy.

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