Question

What would happen if currency in all countries had fewer denominations? People would be more likely to confuse the value of currencies. Exchanging money between countries would be much easier. People could not charge as many different prices for goods. All goods would be more expensive than they currently are.

Answer 1

ANSWER: C) People could not charge as many different prices for goods.

EXPLANATION: If a currency has fewer denominations, then it would be a problem to charge different prices for goods as the change will not be available. For example, if the country is having currency for only $ 50 and $100, then the products can not be priced at $5 or $10. Even the smallest item will have a minimum price of $50 which will be not be worth of. The price of the products will either decrease or increase drastically. Proper pricing of any product will not be possible and it will affect the common people.

Answer 2

If there would be fewer denominations of currencies in all countries then people will not be able to charge as many different prices for goods.

Further explanation:

If currency in all countries had fewer denominations, then the price-setters and producers will not be able to set any price for goods. This is because the availability of fewer denominations of currency will pose a problem in setting any price for the goods as the change will not be available for purchase.

Justification for the correct and incorrect answer:

People would be more likely to confuse the value of currencies: This option is incorrect.

People would not be confused about the value of currencies when there would be very few denominations available in all countries. This is because the value would be well-specified on the currency whose few denominations are available.  

Exchanging money between countries would be easier: This option is incorrect.

The exchange of money between countries would be difficult to execute when all countries would have fewer denominations of currency. Any specific amount would not be traded across countries then due to a lack of enough denominations of currency.

People could not charge as many different prices for goods: This option is correct.

When currencies in all countries would have fewer denominations, in that case, price-setters and producers cannot charge as many different prices for goods. This is because of a lack of change with consumers will pose a problem in charging any price by the producer.  

All goods would be more expensive than they currently are: This option is incorrect.

If currencies of all countries would have fewer denominations, then it would not change the demand or supply of goods as long as the prices that are set by the producers are consistent with the available denominations. Thus, there is no reason that the goods will become more expensive than they currently are.  

Therefore,people could not charge as many various prices for goods, in case of availability of fewer denominations of currencies in all countries.  

Learn more:

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Answer details:

Grade: Senior School

Subject: Economics

Chapter: Money and banking

Keywords: what would happen, if currencies, in all countries, fewer denominations, more likely, to confuse, the value of currencies, exchanging money between, countries, much easier, people could not, charge, as many different prices, all goods, would be, more expensive, than, they currently are.