Money performs its functions only when economic agents engage in market transactions involving the exchange of goods and services. If a family lives in complete isolation and produces everything it consumes, there is no buying or selling. Therefore, money has no economic function in such a situation. The assertion is true because money is unnecessary without market exchange. The reason is false because isolated families do not "exclusively rely on digital representations of money." In fact, they do not require money at all—physical or digital. Hence, Option B is correct.

The sequence begins when more than one economic agent exists (1). These agents begin participating in market transactions (2). As exchange expands, the difficulty of finding a double coincidence of wants creates the need for a smoother transaction mechanism (3). Consequently, money develops as the medium of exchange (4). Thus, the correct order is: 1 → 2 → 3 → 4 Hence, Option C is correct.

The barter system requires that each person possesses exactly what the other wants. In this example, one individual has rice and wants clothing, whereas the other has clothing but wants wheat. Since their wants do not match, exchange cannot take place. This absence of mutual matching is known as the lack of double coincidence of wants, which is one of the major limitations of barter. Therefore, Option A is correct. Option B is unrelated because digital transactions are not involved. Option C concerns fiat money, which is absent in barter. Option D relates to commercial banking and has no connection with barter exchange.

In a barter system, double coincidence of wants means that two individuals must have exactly matching wants for exchange to occur; hence it corresponds to diametrically opposite demands required (d). Search costs become prohibitive in large barter economies (a) because finding suitable trading partners becomes increasingly difficult. Money functions as an intermediate good (c) by facilitating exchange between buyers and sellers. Market transactions refer to the engagement of economic agents (b) in buying and selling goods and services. Thus, the correct matching is: 1 → d 2 → a 3 → c 4 → b Hence, Option C is correct.

Money performs its primary function as a medium of exchange by allowing individuals to sell their goods and services for money and then use that money to purchase the goods and services they require. This removes the necessity for a direct exchange of goods and eliminates the problem of double coincidence of wants. Option A correctly explains the role of money as described in NCERT. Option B is incorrect because money itself is not consumed to satisfy wants; rather, it enables the purchase of goods that satisfy wants. Option C is incorrect because money has many functions beyond paying taxes. Option D is incorrect because money facilitates market transactions but does not eliminate the need for physical or online markets. Therefore, Option A is correct.

Under a barter system, exchange is possible only when there is a double coincidence of wants. As the number of individuals and goods in an economy increases, finding someone who possesses the desired good and simultaneously wants what one offers becomes increasingly difficult. Consequently, the time, effort and resources spent searching for suitable trading partners increase significantly. Therefore, search costs may become prohibitive in a large barter economy, making barter inefficient. Money solves this problem by acting as a universally accepted medium of exchange. Hence, Option B is correct.

One of the important functions of money is serving as a unit of account. It provides a common standard for measuring and expressing the value of all goods and services. Instead of quoting prices in terms of other goods, values are expressed uniformly in monetary units such as rupees. Thus, Option C is correct. Option A is incorrect because physical weight measures quantity, not value. Option B reflects barter rather than a money economy. Option D measures time rather than economic value.

Initially, one rupee purchases 0.5 pencil. If the prices of all commodities double, each commodity costs twice as much in terms of money. Consequently, the purchasing power of one rupee becomes half of its previous level. New value of one rupee: 0.5 ÷ 2 = 0.25 pencil Therefore, Option D is correct. Option A and Option B incorrectly increase purchasing power, while Option C assumes no change despite the rise in prices.

Money performs the store of value function because it preserves purchasing power for future use. It is durable, occupies little storage space and involves relatively low storage costs compared to physical commodities such as rice. This makes money more convenient for carrying wealth into the future. Therefore, Option C is correct. Option A is incorrect because agricultural produce is perishable. Option B is incorrect because wealth can certainly be stored in modern economies. Option D is incorrect because precious metals and property are also stores of wealth, although they are less liquid than money.

The assertion is correct because a general rise in the price level (inflation) reduces the purchasing power of money. As prices increase, each unit of money buys fewer goods and services. The reason is incorrect because money can function efficiently as a store of value only when its value remains reasonably stable. High volatility causes uncertainty and discourages people from holding money. Therefore, the assertion is true, but the reason is false. Hence, Option B is correct.

The purchasing power of money indicates the amount of goods and services that a unit of money can purchase. When the general price level increases, the value of money falls because the same amount of money purchases fewer goods and services than before. Therefore, deterioration in purchasing power means a unit of money can now purchase less of any commodity, making Option D the correct answer. Option A is the opposite of the correct concept. Option B refers to the physical condition of currency notes rather than their purchasing power. Option C is unrelated because inflation does not automatically revive the barter system.

According to the transaction demand for money function: MdT = kPY where: k = Fraction of nominal income held as money P = General price level (GDP deflator) Y = Real income/output Thus, PY represents nominal income (Nominal GDP). Therefore, P denotes the general price level or GDP deflator. Hence, Option A is correct. Option B is an international economics concept unrelated to this equation. Option C refers to real output (Y), not P. Option D has no connection with the transaction demand equation.

The logical sequence begins when an individual has surplus perishable rice (2). The person intends to consume or exchange it later (3). This requires storing the rice, which occupies considerable space (1). Before the future date arrives, the rice may spoil because it is perishable (4). Therefore, the correct order is: 2 → 3 → 1 → 4 Hence, Option C is correct.

Landed property cannot be directly exchanged for everyday commodities and is therefore not easily convertible (d). Surplus rice is a perishable commodity (c). Bonds are valuable financial assets but lack universal acceptability as a medium of exchange (a). Fiat money is the generally acceptable medium of exchange (b). Thus, the correct matching is: 1-d 2-c 3-a 4-b Therefore, Option B is correct.

Assets such as gold, jewellery and houses preserve wealth and therefore perform the store of value function. However, unlike money, they cannot generally be used directly to purchase everyday goods and services. They must first be converted into money. Money differs because it enjoys universal acceptability, making it the most liquid asset. Hence, Option A is correct. Option B is incorrect because many alternative assets possess intrinsic value. Option C is incorrect because both money and physical assets can exist physically. Option D is incorrect because market price does not determine whether an asset functions as money.

Liquidity refers to the ease with which an asset can be used to purchase goods and services without loss of value. Physical money is the most liquid asset because it is universally accepted as a medium of exchange. A fixed term deposit is less liquid because it generally requires withdrawal or conversion into cash before it can be spent. It may also involve penalties if withdrawn before maturity. Therefore, the assertion is false. The reason is true because money is universally accepted and can be exchanged immediately for goods and services. Hence, Option D is correct.

A cashless society functions through electronic payment systems rather than physical currency. e-Wallets facilitate digital payments. Aadhaar Enabled Payment System (AEPS) enables electronic financial transactions. National Financial Switch (NFS) supports electronic ATM and payment network operations. However, physical bank notes represent traditional cash and are not an electronic representation of money. Therefore, Option B is correct.

The widespread availability of mobile phones and smartphones has enabled millions of people to access banking services and digital payment platforms. This has made financial inclusion more achievable by allowing people to conduct transactions through mobile banking, UPI, digital wallets and Aadhaar-enabled services. Therefore, Option A is correct. Option B merely increases the supply of cash and does not directly improve financial inclusion. Option C reduces financial access. Option D contradicts the objective of promoting digital payments.

The passage clearly explains that in a cashless society, financial transactions are conducted through the transfer of digital information instead of physical bank notes or coins. Digital payment systems such as mobile banking, UPI and electronic wallets facilitate these transactions. Therefore, Option D is correct. Option A refers to commodity money, Option B represents barter and Option C still involves physical cash, all of which contradict the passage.

The passage states that widespread mobile and smartphone penetration has made financial inclusion a realistic dream. Smartphones enable people to access digital banking, electronic payment systems and mobile wallets, thereby reducing transaction costs and improving the efficiency of financial transactions. Therefore, Option C is correct. Option A is incorrect because people continue purchasing goods. Option B has no relation to smartphone penetration. Option D is incorrect because smartphones do not replace the functions of the central bank.