Consider the following statements in an economy: Value of transactions is generally higher than the value of output (GDP) Money required for transaction in the economy is equal to the value of transactions Select the correct answer using the code given below: Options: A . &nbsp(ii) only B . &nbspBoth (i) & (ii) C . &nbsp(i) only D . &nbspNeither (i) nor (ii)

Consider the following statements in an economy: Value of transactions is gen

Question

Consider the following statements in an economy:

Value of transactions is generally higher than the value of output (GDP)

Money required for transaction in the economy is equal to the value of transactions

Select the correct answer using the code given below:

Options:

A . (ii) only

B . Both (i) & (ii)

C . (i) only

D . Neither (i) nor (ii)

Answer: Option C
Answer: (c)
GDP (Output) is the final value of goods and services produced in the economy. But there are a lot of transactions that happen in the economy for intermediate goods, so the value of transactions is higher than the value of final output in the economy.
For example, suppose, I purchased Rs. 30 of input to produce Rs. 100 of the final output, which I sold in the market. GDP will be Rs. 100, while the value of transactions in the economy will be Rs. 130.
Since money keeps on moving between different hands, the same money is used for transacting again and again (also referred to as the velocity of circulation), so the money required for doing transactions will be less than the total value of transactions in the economy.
As of 13th March 2020, Money Supply in the economy was Rs. 165 lakh crores. While GDP of 2019-20 is expected to be Rs. 204.4 lakh crore. And the value of transactions is much more than the GDP.

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