Money
14 Grade 10 Business Studies questions on Money, with worked marking schemes. 14 questions are available on this topic in full.
Question 1
1 markMwangi kept Ksh 50,000 in a tin at home for three years. When he finally took the money out, it bought far fewer building materials than it would have bought when he put it away. The function of money that had been weakened is:
A. store of value
B. standard for deferred payment
C. medium of exchange
D. measure of value
(1 mark)
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1 markA Ksh 1,000 note costs only a few shillings to print, yet a trader in Nyeri will hand over goods worth Ksh 1,000 in exchange for it. The main reason the note is accepted is that:
A. the note can be exchanged for gold at the Central Bank of Kenya
B. the law declares it legal tender and the public is confident that others will accept it
C. the paper and ink used to make the note are themselves worth Ksh 1,000
D. every trader is required by law to keep a supply of notes in the shop
(1 mark)
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3 marksState three problems a trader would face if Kenya went back to barter trade today.
(3 marks)
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4 marksA maize trader in Narok has just sold produce worth Ksh 300,000. Explain two reasons why he would prefer the buyer to pay the money into his bank account rather than in cash.
(4 marks)
Marking scheme
Any TWO; 1 mark for the reason and 1 mark for the explanation (2 marks each, max 4). 1. Safety (1) - a large sum of cash can be stolen or lost on the journey home, while money in an account is secure (1). 2. Avoids counterfeit notes (1) - the bank credits a verified amount, so he cannot be paid with fake currency (1). 3. Provides a record of the transaction (1) - the statement is evidence of the sale and helps in keeping books and meeting tax obligations (1). 4. Convenience in handling large amounts (1) - a large sum of cash is bulky and difficult to count and carry, while a transfer needs no handling at all (1). 5. Easier onward payment (1) - he can pay his own suppliers and transporters by cheque or transfer straight from the account (1). 6. The balance may earn interest (1) - money left in a savings account grows instead of lying idle (1).
Question 5
1 markA matatu owner in Nakuru sets aside Ksh 20,000 every month which he does not spend on anything, keeping it only in case the vehicle breaks down or is involved in an accident. He is holding this money for the:
A. transactionary motive
B. precautionary motive
C. speculative motive
D. profit motive
(1 mark)
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4 marksIdentify four forms in which money is held in Kenya today.
(4 marks)
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6 marksExplain three functions of money to a trader who sells second-hand clothes at an open-air market in Kitale.
(6 marks)
Marking scheme
Any THREE functions; 1 mark for naming the function and 1 mark for the explanation tied to the trader (2 marks each, max 6). 1. Medium of exchange (1) - customers pay her in shillings instead of offering goods, so she does not have to look for a buyer who has what she wants (1). 2. Measure/unit of value (1) - she prices a shirt at Ksh 300 and a coat at Ksh 900, so the worth of different garments can be compared using one common yardstick (1). 3. Store of value (1) - the day's takings can be kept in the bank or a mobile wallet and used to restock later, since money does not perish like farm produce (1). 4. Standard for deferred payment (1) - she can take a bale from her supplier today and agree to pay an agreed sum at the end of the month (1). 5. Means of settling debts/obligations (1) - she uses money to pay market fees, rent and casual workers (1).
Question 8
2 marksDistinguish between the transactionary motive and the speculative motive for holding money.
(2 marks)
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4 marksExplain two ways in which mobile money services have changed the way small traders in Kenya handle money.
(4 marks)
Marking scheme
Any TWO; 1 mark for the point and 1 mark for the explanation (2 marks each, max 4). 1. Payments are now made without carrying cash (1) - a trader can receive payment from a customer or pay a supplier in another town instantly, reducing the risk of theft and travel costs (1). 2. Money can be stored safely without a bank account (1) - traders who are far from a bank branch keep takings in a wallet and withdraw at a nearby agent (1). 3. Transactions leave an automatic record (1) - the messages and statements help the trader track sales and can be used to support an application for credit (1). 4. Access to small loans and savings products (1) - a trader can borrow a small amount to restock and repay within a short period (1). 5. Trading hours and reach have widened (1) - customers can order and pay from a distance, so the trader is no longer limited to those who walk to the stall (1).
Question 10
1 markA tea farmer in Kericho collects fertiliser from a stockist and they agree in writing that she will pay Ksh 8,000 after the next picking. In this arrangement, money is serving as a:
A. standard for deferred payment
B. measure of value
C. medium of exchange
D. store of value
(1 mark)
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4 marksOutline four qualities that an item must have before it can serve well as money.
(4 marks)
Marking scheme
Any FOUR, 1 mark each (quality must be named; a brief gloss is acceptable but not required): 1. Durability - it must last long without wearing out or decaying. 2. Portability - it must be easy to carry about in reasonable amounts. 3. Divisibility - it must be capable of being broken into smaller units so that balances can be given. 4. Homogeneity/uniformity - units of the same denomination must be identical. 5. Relative scarcity - its supply must be limited so that it retains value. 6. General acceptability - everyone in the country must be willing to receive it in payment. 7. Cognisability - it must be easy to recognise and hard to counterfeit. 8. Stability of value - its purchasing power should not change sharply. Max 4 marks.
Question 12
1 markA shopkeeper in Kisii sells a sweet at Ksh 5 and a bar of soap at Ksh 120, and is able to give every customer the exact balance. The quality of money that makes this possible is:
A. divisibility
B. scarcity
C. portability
D. durability
(1 mark)
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1 markThe body with the sole authority to issue notes and coins in Kenya is the:
A. National Treasury
B. commercial banks
C. Kenya Revenue Authority
D. Central Bank of Kenya
(1 mark)
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1 markWanjiru has surplus milk from her dairy cows in Bomet and wants a panga. She spends a whole day moving round the market looking for a blacksmith who is willing to accept milk. The difficulty Wanjiru is facing in barter trade is:
A. the absence of a double coincidence of wants
B. the difficulty of storing milk for a long time
C. the indivisibility of the panga
D. the lack of a common measure of value
(1 mark)
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