CBSE Class 12 Economics Money and Banking MCQs Set 04

Question. Bank money is that money which is:
(a) printed by the government
(b) printed by RBI
(c) generated in the form of credit creation
(d) All of the options
Answer: (c) generated in the form of credit creation

Question. Identify which of the following statements is true?
(a) Expansion of exchange has led to expansion of markets for goods and services.
(b) Supply of money includes stock of money held by the government.
(c) Evolution of money has facilitated current payments.
(d) Main characteristic of money is solidness.
Answer: (a) Expansion of exchange has led to expansion of markets for goods and services.

Question. Which of the following is not concerned with banking organisation?
(a) Credit creation
(b) Fiscal deficit
(c) Cash reserve ratio
(d) Bank rate
Answer: (b) Fiscal deficit

Question. Identify which of the following statements is true?
(a) Facilitation of exchanges is considered to be the only role of money.
(b) India got its Central Bank in 1945.
(c) Central Bank expands money supply of the country.
(d) Economic exchanges without the mediation of money are referred to as barter exchanges.
Answer: (d) Economic exchanges without the mediation of money are referred to as barter exchanges.

Question. The broad definition of money is based on :
(a) Medium of payment function
(b) Store of value function
(c) Transferability of money
(d) None of the options
Answer: (b) Store of value function

Question. Identify which of the following statements is true?
(a) Demand deposits are equal to cash deposits with the Commercial Banks.
(b) The Central Bank is a banker to the government.
(c) In India, CRR and SLR are fixed by the Commercial Banks themselves.
(d) The Central Bank issues currency on the basis of CRR.
Answer: (b) The Central Bank is a banker to the government.

Question. Identify which of the following statements is true?
(a) The Central Bank focuses on growth and stability of the economy.
(b) The commercial bank is a banker to the government.
(c) Market rate refers to the rate at which the RBI lends money to the commercial banks.
(d) In India, LRR is determined by the commercial banks themselves.
Answer: (a) The Central Bank focuses on growth and stability of the economy.

Question. Identify which of the following statements is true?
(a) Supply of money is a flow concept.
(b) Notes and coins are legal tenders.
(c) OD includes deposits of the government of the country with RBI.
(d) Supply of money includes stock of money held by the government.
Answer: (b) Notes and coins are legal tenders.

Question. In the time of COVID-19, the fiscal packages so far have aimed at cushioning the immediate impact of the sudden drop in economic activity on firms and households, and to preserve countries’ productive capacity. This will result into which money supply component to increase primarily.
(a) M1
(b) M2
(c) M3
(d) M4
Answer: (a) M1

Question. Which of the following determines credit creation by Commercial Banks?
(a) Legal Reserve Ratio
(b) Initial Deposits
(c) Both (a) and (b)
(d) None of the options
Answer: (c) Both (a) and (b)

Question. What will happen to the money supply when the government purchases securities from the open market?
(a) Money supply will increase
(b) Money supply will decrease
(c) Money supply will remain same
(d) None of the options
Answer: (a) Money supply will increase

Question. Which of the following is a qualitative instrument of the monetary policy of the Central Bank to control money supply?
(a) Repo Rate
(b) Margin Requirement
(c) Bank Rate
(d) None of the options
Answer: (b) Margin Requirement

Question. The rate at which Central Bank lends money to commercial banks for immediate cash requirement is called:
(a) Repo Rate
(b) Reverse Repo Rate
(c) Bank Rate
(d) Statutory Liquidity Ratio
Answer: (c) Bank Rate

Question. The deposits from which money can be withdrawn anytime by writing a cheque are called:
(a) Time deposits
(b) Fixed Deposits
(c) Demand Deposits
(d) Near Deposits
Answer: (c) Demand Deposits

Question. Demand deposits include:
(a) Saving account deposits and fixed deposits
(b) Saving account deposits and current account deposits
(c) Current account deposits and fixed deposits
(d) All types of deposits
Answer: (b) Saving account deposits and current account deposits

Question. Credit creation by commercial banks is determined by:
(a) Cash Reserve Ratio (CRR)
(b) Statutory Liquidity Ratio (SLR)
(c) Initial Deposits
(d) All of the options
Answer: (d) All of the options

Question. The ratio of total deposits that a commercial bank has to keep with Reserve Bank of India is called:
(a) Stautory liquidity ratio
(b) Deposit ratio
(c) Cash reserve ratio
(d) Legal reserve ratio
Answer: (c) Cash reserve ratio

Question. The Central Bank can increase availability of credit by:
(a) Raising repo rate
(b) Raising reverse repo rate
(c) Buying government securities
(d) Selling government securities
Answer: (c) Buying government securities

Question. The rate at which the Central Bank lends money to commercial banks
(a) CRR
(b) SLR
(c) bank rate
(d) all of the options
Answer: (c) bank rate

Question. The function performed by Central Bank
(a) currency authority
(b) banker to commercial banks
(c) banker to the Government
(d) all of the options
Answer: (d) all of the options

Question. Loans offered by commercial banks are:
(a) Less than the deposits received by them
(b) More than the deposits received by them
(c) Equal to the deposits received by them
(d) None of the options
Answer: (a) Less than the deposits received by them

Question. Supply of money refers to ................
(a) currency held by the public
(b) currency held by Reserve Bank of India (RBI)
(c) currency held by the public and demand deposits with commercial banks
(d) currency held in the government account
Answer: (c) currency held by the public and demand deposits with commercial banks

Question. In India, coins are issued by .................... .
(a) Reserve bank of India
(b) Commercial Bank
(c) State Bank of India
(d) Ministry of Finance
Answer: (d) Ministry of Finance

Question. Money that is issued by the authority of the government is called ....................... .
(a) full bodied money
(b) credit money
(c) fiat money
(d) fiduciary money
Answer: (c) fiat money

Question. Money value is .................... Commodity value in full bodied money whereas Money value is .................... Commodity value in credit money.
(a) greater than, equal to
(b) equal to, greater than
(c) greater than, greater than
(d) equal to, equal to
Answer: (b) equal to, greater than

Question. Money has separated the act of ......................... and .......................... .
(a) sale, purchase
(b) bank money, credit money
(c) goods, services
(d) None of the options
Answer: (a) sale, purchase

Question. .................... and .......................... are primary functions of money.
(a) Store of value, standard for deferred payments
(b) Standard for deferred payments, measure of value
(c) Medium of exchange, measure of value
(d) Medium of exchange, store of value
Answer: (c) Medium of exchange, measure of value

Question. In a modern economy, money comprises ...................... and ...................... .
(a) security deposits, cash
(b) exchange, distribution
(c) cash, bank deposits
(d) None of the options
Answer: (c) cash, bank deposits

Question. ....................... is the narrower among the all measures of money supply.
(a) M1
(b) M2
(c) M3
(d) M4
Answer: (a) M1

Question. ............................ is an apex institute of banking structure of India.
(a) Central Bank
(b) Commercial Bank
(c) State bank of India
(d) Government of India
Answer: (a) Central Bank

Question. Lower repo rate will lead to .................. .
(a) decrease in money supply
(b) increase in money supply
(c) the same supply of money in the economy
(d) decrease in money demand
Answer: (b) increase in money supply

Question. ...................... is the money whose monetary value is more than the commodity value.
(a) Fiat Money
(b) Credit Money
(c) Full Bodied Money
(d) Fiduciary Money
Answer: (b) Credit Money

Question. The part of LRR kept by the banks with themselves is called ............... .
(a) SLR
(b) CRR
(c) Repo rate
(d) Reserve Repo rate
Answer: (a) SLR

Question. ................... as a standard for deferred payments has led to the emergence of ............... .
(a) notes, commodity market
(b) coins, financial market
(c) money, commodity market
(d) money, financial market
Answer: (d) money, financial market

Question. Credit cards issued by the banks ............................... .
(a) encourage consumer spending
(b) increase aggregate demand in the economy
(c) both (a) and (b)
(d) None of the options
Answer: (c) both (a) and (b)

Question. .................... is known as the most liquid assets.
(a) gold
(b) cash
(c) securities
(d) all of the options
Answer: (b) cash

Question. Money has led to the .................. of exchange.
(a) contraction
(b) limitation
(c) expansion
(d) None of the options
Answer: (c) expansion

Question. Money plays .................. role in a situation when there is .................. exchange.
(a) significant, no
(b) no, significant
(c) no, no
(d) None of the options
Answer: (c) no, no

Question. CRR is .................. to lower credit creation capacity of the .................. banks.
(a) decreased, central
(b) raised, commercial
(c) raised, central
(d) None of the options
Answer: (b) raised, commercial

Question. Monetary policy in India is implemented by ........................ .
(a) Economic Planning Commission
(b) NITI Aayog
(c) Reserve Bank of India
(d) Finance Dept.
Answer: (c) Reserve Bank of India