MCQ Of Money and Banking
Question. What is the defect of the barter system?
(A) Lack of double coincidence of wants
(B) Difficulty in the measurement of value
(C) Difficulty in store of value
(D) All of these
Answer: (D) All of these
Question. Which of the following is the credit money?
(A) Cheque and draft
(B) Promissory note
(C) Exchange note
(D) All of these
Answer: (D) All of these
Question. Which among the following is the near money?
(A) Bonds
(B) Insurance policy
(C) Securities
(D) All of these
Answer: (D) All of these
Question. Which of the following is the feature of money?
(A) General acceptability
(B) Homogeneous unit
(C) Liquid asset
(D) All of these
Answer: (D) All of these
Question. In order to encourage investment in the economy, the Central Bank may ________
(A) Reduce Cash Reserve Ratio
(B) Increase Cash Reserve Ratio
(C) Sell Government securities in the open market
(D) Increase Bank Rate
Answer: (A) Reduce Cash Reserve Ratio
Question. Institution that accepts deposits for lending purpose is known as __________
(A) Commercial Bank
(B) Central Bank
(C) Government
(D) Public
Answer: (A) Commercial Bank
Question .Which of the following is the function of a commercial bank?
(A) Accepting deposits
(B) Credit creation
(C) Agency function
(D) All of these
Answer: (D) All of these
Question. The central bank can increase the availability of credit by:
(A) Rasing repo rate
(B) Raising reverse repo rate
(C) Buying government securities
(D) Selling government securities
Answer: (D) Selling government securities
Question. Giving permission to withdraw money by an amount more than deposited to is known as _________
(A) Advance
(B) Overdraft
(C) Loan
(D) None of these
Answer: (B) Overdraft
Question. What are the alternative measures of money supply in India?
(A) M1
(B) M2
(C) M3 and M4
(D) All of these
Answer: (D) All of these
Question. Who circulates all mint and one rupee not in India?
(A) Ministry of Finance
(B) RBI
(C) Ministry of External Affairs
(D) State Government
Answer: (A) Ministry of Finance
Question. Which of the following is the narrow measure of the money supply?
(A) M2
(B) M3
(C) M1
(D) M4
Answer: (C) M1
Question. When was the minimum reserve system started in India?
(A) 1947
(B) 1948
(C) 1951
(D) 1957
Answer: (D) 1957
Question. Which is the most liquid measure of the money supply?
(A) M4
(B) M3
(C) M2
(D) M1
Answer: (D) M1
Question . High Powered Money includes:
(A) C + DD + OD
(B) C + R + OD
(C) C + R + TD
(D) C + DD + TD
Answer: (B) C + R + OD
Question. Indian Monetary System is based on ________
(A) Paper Standard
(B) Metallic Standard
(C) Gold Standard
(D) Credit Money Standard
Answer: (A) Paper Standard
Question. Which of the following is the apex bank of India?
(A) RBI
(B) SBI
(C) SBP
(D) PNB
Answer: (A) RBI
Question. Who has the right of note issue?
(A) Central Bank
(B) Commercial Bank
(C) Government
(D) Co-operative Bank
Answer: (A) Central Bank
Question. Which of the following is the function of a Central bank?
(A) Issue of notes
(B) Banker to the Government and Banks
(C) Supply and control of money
(D) All of these
Answer: (D) All of these
Question. The ratio of total deposits that a commercial bank has to keep with RBI is called:
(A) Statutory liquidity ratio
(B) Deposit ratio
(C) Cash reserve ratio
(D) Legal reserve ratio
Answer: (C) Cash reserve ratio
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 type of deposits
Answer: (B) Saving account deposits and current account deposits
Question. What are the necessary conditions of the Barter System?
(a) Limited Needs
(b) Limited Exchange Area
(c) Economically Backward Society
(d) All the above
Answer: (d) All the above
Question. What are the advantages of the Barter System?
(a) Simple System
(b) More Mutual Co-operation
(c) No Economic Disparities
(d) All the above
Answer: (d) All the above
Question. Which one is the difficulty of the Barter System?
(a) Lack of Double Coincidence
(b) Difficulty of Division of the Goods
(c) Lack of General Acceptable Measure of Value
(d) All the above
Answer: (d) All the above
Question. Which is the correct order of money evolution?
(a) Commodity Money, Paper Money, Metal Money
(b) Commodity Money, Metal Money, Paper Money, Credit Money
(c) Credit Money, Metal Money, Paper Money
(d) None of the above
Answer: (b) Commodity Money, Metal Money, Paper Money, Credit Money
Question. “Money is what money does.” Who said it?
(a) Hartley Withers
(b) Hartley
(c) Thomas
(d) Keynes
Answer: (a) Hartley Withers
Question. Which one is included in the primary function of money?
(a) Medium of Exchange
(b) Measure of Value
(c) Both (a) and (b)
(d) Store of Value
Answer: (c) Both (a) and (b)
Question. Which one is included in the secondary function of money?
(a) To make Deferred Payments
(b) Store of Value
(c) Transfer of Value
(d) All of these
Answer: (d) All of these
Question. “Money is a pivot around which the whole economy clusters.” Who said it?
(a) Keynes
(b) Robertson
(c) Marshall
(d) Hartrey
Answer: (c) Marshall
Question. The function of money is:
(a) Medium of Exchange
(b) Measure of Value
(c) Store of Value
(d) All the above
Answer: (d) All the above
Question. The functions of money include:
(a) Value determination
(b) Store of value
(c) Means of exchange
(d) All of these
Answer: (d) All of these
Question. Money is a matter which is:
(a) a measure of value
(b) accepted as a means of exchange
(c) used to store wealth
(d) All of these
Answer: (d) All of these
Question. By supply of money we mean?
(a) Money deposited in the bank
(b) Money available with the public
(c) Deposits with post office savings bank
(d) All of these
Answer: (d) All of these
Question. Which of the following is not a function of money?
(a) Medium of exchange
(b) Price stability
(c) Store of value
(d) Unit of account
Answer: (b) Price stability
Question. Which one is the Bank of the Public?
(a) Commercial Bank
(b) Central Bank
(c) Both (a) and (b)
(d) None of the above
Answer: (a) Commercial Bank
Question. The primary function of Commercial Bank is?
(a) Accepting Deposits
(b) Advancing Loans
(c) Credit Creation
(d) All of these
Answer: (d) All of these
Question. Deposits accepted by the Commercial Banks:
(a) Current Deposits
(b) Saving Deposits
(c) Time Deposits
(d) All of these
Answer: (d) All of these
Question. What type of loan is advanced by Commercial Banks?
(a) Cash Credit
(b) Overdraft
(c) Loan and Advance
(d) All of these
Answer: (d) All of these
Question. Which function is the Secondary Function of Commercial Banks?
(a) Agency Function
(b) General Utility Function
(c) Social Function
(d) All of these
Answer: (d) All of these
Question. Which is the Agency Function of Commercial Banks?
(a) Advancing Loans
(b) Accepting Deposits
(c) Act as Trustee
(d) Locker Facility
Answer: (c) Act as Trustee
Question. Credit money is increased when CRR:
(a) Falls
(b) Rises
(c) Both (a) and (b)
(d) None of these
Answer: (a) Falls
Question. The full form of ATM is:
(a) Any Time Money
(b) All Time Money
(c) Automated Teller Machine
(d) Both (a) and (b)
Answer: (c) Automated Teller Machine
Question. The main function of a commercial bank is:
(a) Credit control
(b) Loaning to other banks
(c) Accept deposits from customers
(d) All the above
Answer: (c) Accept deposits from customers
Question. What is the Central Bank of India?
(a) Commercial Bank
(b) Central Bank
(c) Private Bank
(d) None of these
Answer: (a) Commercial Bank
Question. Commercial banks:
(a) Issue currency notes
(b) Accepts deposits from customers
(c) Provide loans to customers
(d) Only (b) and (c)
Answer: (d) Only (b) and (c)
Question. What is true for the Central Bank?
(a) Apex Bank of the Country
(b) Ownership of the Government
(c) Regulates the entire banking system in the country
(d) All the above
Answer: (d) All the above
Question. Central Bank of India is:
(a) Reserve Bank of India
(b) State Bank of India
(c) Central Bank of India
(d) Bank of India
Answer: (a) Reserve Bank of India
Question. Which of the following is the function of the Central Bank?
(a) Monopoly of Note Issue
(b) Banker of the Government
(c) Custodian of Foreign Exchange Reserves
(d) All the above
Answer: (d) All the above
Question. Which type of currency is issued by Central Bank?
(a) Currency
(b) Credit Money
(c) Coins
(d) All of these
Answer: (a) Currency
Question. Which is the major objective of credit control?
(a) To maintain Price Stability
(b) To stabilize Exchange Rate
(c) To production and Employment
(d) All the above
Answer: (b) To stabilize Exchange Rate
Question. Which one is true?
(a) Bank rate is a rate at which Central Bank is ready to give credit to commercial banks
(b) Bank rate and interest rates are different
(c) Bank rate is the discount rate of the Central Bank
(d) All the above
Answer: (d) All the above
Question. Which is not a quantitative method of credit control?
(a) Bank Rate
(b) Moral Suasion
(c) Open Market Operations
(d) Change in CRR
Answer: (b) Moral Suasion
Question. Every bank is required to maintain a fixed percentage of its assets in the form of cash is called:
(a) Cash Reserve Ratio
(b) Statutory Liquidity Ratio
(c) Both (a) and (b)
(d) None of the above
Answer: (b) Statutory Liquidity Ratio
Question. Reserve Bank of India was established in :
(a) 1947
(b) 1935
(c) 1937
(d) 1945
Answer: (b) 1935
Question. Monetary policy is related with:
(a) Public Expenditure
(b) Taxes
(c) Public Debt
(d) Open market operations
Answer: (d) Open market operations
Question. Which of the following issue paper currency in the country?
(a) Commercial Bank
(b) Central Bank
(c) World Bank
(d) Industrial Bank
Answer: (b) Central Bank
Question. The central bank controls credit through:
(a) Bank rate
(b) Open market
(c) CRR
(d) All the above
Answer: (a) Bank rate
Question. Which of the following is a qualitative method of credit control?
(a) Variation in cash reserve ratio of banks
(b) Restriction on consumer credit
(c) Open market operations
(d) Variation in bank rate
Answer: (b) Restriction on consumer credit
Question. The major objectives of monetary policy is/are:
(a) Increase in output and employment
(b) Stability in the foreign exchange rate
(c) Price stability
(d) All of these
Answer: (d) All of these
Question. Who regulates the money supply?
(a) Govt, of India
(b) Reserve Bank of India
(c) Commercial Bank
(d) Planning Commission
Answer: (b) Reserve Bank of India
Question. With which Narsimham Committee is related to?
(a) Tax Reforms
(b) Banking Reforms
(c) Agriculture Reforms
(d) Infrastructure Reforms
Answer: (b) Banking Reforms
Question. In which year the second Narsimham Committee was constituted?
(a) 1978
(b) 1991
(c) 1997
(d) 1998
Answer: (d) 1998
Question. Banking Ombudsman Scheme was announced in the year:
(a) 1990
(b) 1995
(c) 1997
(d) 2000
Answer: (b) 1995
Question. Which was included in the purview of the Banking Ombudsman Scheme?
(a) All Scheduled Banks
(b) Co-operative Banks
(c) Commerical Banks
(d) All of these
Answer: (d) All of these
Question. Which committee was constituted for suggesting consumer service improvements in banks?
(a) Raja Chelliah Committee
(b) Goiporia Committee
(c) Verma Committee
(d) Chakrabarty Committee
Answer: (b) Goiporia Committee
Question. For revival and restructuring of weak banks of the public sector, which committee was constituted?
(a) Verma Committee
(b) Goiporia Committee
(c) Rekhi Committee
(d) Narsimham Committee
Answer: (a) Verma Committee
Question. RBI announced the guidelines to issue licenses to new banks of the private sector on:
(a) January 22, 1993
(b) March 15, 1995
(c) April 1, 1999
(d) None of these
Answer: (a) January 22, 1993
Question. Who is the custodian of the Indian Banking system?
(a) Reserve Bank of India
(b) State Bank of India
(c) Unit Trust of India
(d) LIC of India
Answer: (a) Reserve Bank of India
Question . Banking Sector Reforms in India began in:
(a) 1969
(b) 1981
(c) 1991
(d) 2001
Answer: (c) 1991
Question. 14 big scheduled commercial banks in India were nationalised in:
(a) 1949
(b) 1955
(c) 1969
(d) 2000
Answer: (c) 1969
Question . Which is associated with reforms in the banking sector?
(a) Year 1991
(b) Narsimham Committee
(c) Y.V. Reddy Committee
(d) Only (a) and (b)
Answer: (d) Only (a) and (b)
Question .“Money is what money does”. Who said this:
(a) Hartley Withers
(b) Harte
(c) Prof. Thomas
(d) Keynes
Answer: (a) Hartley Withers
Question. The function of money is:
(a) Medium of exchange
(b) Measure of value
(c) Store of value
(d) All of the above
Answer: (a) Medium of exchange
Question. The meaning of money supply is:
(a) Money deposits in the bank
(b) Cash available with public
(c) Savings in the post office
(d) All of the above
Answer: (d) All of the above.
Question. What is the Central Bank of India:
(a) Commercial Banks
(b) Central Bank
(c) Private Bank
(d) None of these
Answer: (a) Commercial Banks
Question. Through which method we can withdraw money from the bank:
(a) Drawing letter
(b) Cheque
(c) A.T.M.
(d) All of the above
Answer: (d) All of the above.
Question. Who is the guardian of the Indian Banking System:
(a) Reserve Bank of India
(b) State Bank of India
(c) Unit Trust of India
(d) Life Insurance Company of India
Answer: (a) Reserve Bank of India
Question. Narasimham Committee is related to what:
(a) Improvement in Taxation
(b) Improvement in Banking
(c) Improvement in Agriculture
(d) Improvement in Infrastructure
Answer: (b) Improvement in Banking
Question. Aman, a vegetable seller, exchanged 4 apples with Rahul, a cloth dealer for 1 metre of cloth. This is an example of :
(a) Barter system
(b) Monetary system
(c) Goods system
(d) None of the above
Answer: (a) Barter system
Question. Which of the following, solves the problem of “Double coincidence of wants”?
(a) Goods
(b) Banks
(c) Money
(d) All of the above
Answer: (c) Money.
Question. The problem of “Double coincidence of wants” is solved by which of the following : –
(a) Goods
(b) Money
(c) Banks
(d) All of the above
Answer: (b) Money
Question. Double coincidence of wants refers to the fulfillment of wants of the buyer and seller: –
(a) Simultaneous; Mutual –
(b) Sequential ; Mutual
(c) Mutual ; simultaneous
(d) Mutual ; Sequential
Answer:
Question. A owns a camel that he wants to trade for a goat. However, there are no sellers of goat in the market. This is an example of : –
(a) Lack of Double coincidence of wants
(b) Existence of Double coincidence of wants
(c) Simultaneous coincidence of wants
(d) Sequential coincidence of wants
Answer
Question. Which of the following is a the function of money?
a) Medium of exchange
b) Store of value
c) Measure of vale
d) All of the above
Answer: (d) All of the above
Question. Which of the following is the thing which is generally accepted by everyone as a medium of exchange?
(a) Money
(b) Goods
(c) Services
(d) None of the above
Question. The supply of Money is a : –
(a) Flow Concept
(b) Stock Concept
(c) Monetary Concept
(d) None of the above
Answer: (b) Stock Concept
Question. Which function of money, removes the problem of double coincidence of wants?
(a) Measure of value
(b) Medium of exchange
(c) Store of value
(d) None of the above
Answer: (b) Medium of exchange
Question. In the present world, the act of purchase of goods, and sale of goods have been separated due to the existence of money. This has been facilitated by which of the following functions of money: –
(a) Measure of value
(b) Medium of exchange
(c) Store of value
(d) None of the above
Answer: (b) Medium of exchange
Question. Which function considers the value of the money in one unit?
(a) Medium of exchange
(b) Measure of value
(c) Store of value
(d) Standard for deferred payments
Answer: (b) Measure of value
Question. Which function allows the payment to be delayed till future date?
(a) Medium of exchange
(b) Measure of value
(c) Store of value
(d) Standard of deferred payments
Answer: (d) Standard of deferred payments
Question. Money acts as a common denomination to express the exchange ratio of goods. This has been facilitated by which of the following functions of money: –
(a) Medium of exchange
(b) Measure of value
(c) Store of value
(d) Standard Measure
Answer: (d) Standard Measure
Question. Which of the following is not a measure of money supply?
(a) M1
(b)
(c) M2
(d)
Answer: (b) M0
Question. Which of the following aspects are true about the money supply : –
(a) It is the total volume of money held by public
(b) Such money is held at a particular point of time
(c) The money is held in an economy
(d) All of the above
Answer: (d) All of the above
Question. Which of the following is not a feature of money supply?
(a) It includes money held by public]
(b) It includes money held by banks
(c) It is a stock concept
(d) All of the above
Answer: (b) It includes money held by banks
Question. Which of the following is the most liquid and least liquid form of money supply, in that order?
(a)
(b) M2 M4
(c) M3 M4
(d) M4:M1
Answer: (a) M1: M4
Question. Which of the following is the least liquid form of money supply?
(a) M1
(b)
(c)
(d)
Answer: (d) M4
Question. M1 and M2 makes make up
a) Narrow money supply
b) Broad money supply
c) Broken money supply
d) None of the above
Answer: (a) Narrow money supply
Question. Government RBI, produce High powered money.
(a) And
(b) Or
(c) Nor
(d) Both (a) and (b)
Answer: (a) And
Question. Which of the following is not included in high powered money?
(a) Currency held by public
(b) Cash reserves held by banks
(c) Demand deposits with banks
(d) None of the above
Answer: (c) Demand deposits with banks
Question. M1 consists of, which of the following:
(a) Currency held by public
(b) Demand deposits with commercial banks
(c) Other deposits with RBI
(d) All of the above
Answer: (d) All of the above
Question. M1 excludes which of the following: –
(a) Currency held by public
(b) Demand deposits with commercial banks
(c) Other deposits with RBI
(d) None of the above
Answer: (d) None of the above
Question. Which of the following statement is correct?
(a) Net time deposits with banks
(b) savings with post office
(c) M3 = M2 + net time deposits with bank
(d) currency held with banks
Answer: (a) M3 = M1 + Net time deposits with banks
Question. Which of the following is not a Commercial Bank?
(a) State bank of India;
(b) Punjab National Bank;
(c) RBI;
(d) Canara Bank.
Answer: (c) RBI
Question. Which of the following is not the primary function of commercial banks?
a) Accepting deposits
b) Advancing loans
c) Both (a) and (b)
d) None of the above
Answer: (d) None of the above
Question. The difference between two interest rates is called: –
a) Spread
b) Margin
c) Profit
d) None of the above
Answer: (a) Spread
Question. The fraction of deposits to be kept by the bank, which cannot be given as loans is called
a)
b) SLR
c) LRR
d) None of the above
Answer: (c) LRR
Question. Money multiplier is also known as
a) Credit multiplier
b) Deposit multiplier
c) Both (a) and (b)
d) None of the above
Answer: (c) Both (a) and (b)
Question. If LRR is , what is the money multiplier?
a) 2
b) 10
c) 5
d) 4
Answer: (c) 5
Question. What are the total deposits if LRR is and initial deposits are Rs.
a) 250000
b) 500000
c) 400000
d) 800000
Answer: (c) 400000
Question. Which of the following equations is true?
a) Initial deposits = Total deposits x Money multiplier
b) Total deposits = Initial deposits Money multiplier
c) Total deposits = Initial deposits + Money multiplier
d) Initial deposits = Total deposits LRR
Answer: (b) Total deposits = Initial deposits Money multiplier
Question. Why do banks only keep a fraction of deposits?
a) All depositors do not withdraw at the same time,
b) There is constant flow of deposits in economy
c) Both (a) and (b)
d) None of the above
Answer: (c) Both (a) and (b)
Question. Commercial banks work for the purpose of
a) Welfare
b) Earning profit
c) Both (a) and (b)
d) None of the above
Answer: (b) Earning profit
Question. Which of the following is not a bank?
a) PNB
b)
c) LIC
d) None of the above
Answer: (c) LIC
Question. If initial deposits are Rs. 500 and LRR is , what is money multiplier?
a) 2
b) 20
c) 10
d) 1
Answer: (c) 10
Question. . LIC and UTI are not banks because:
a) They do not advance loans
b) They do not accept deposits
c) They neither accept deposits nor advance loans
d) None of the above
Answer: (c) They neither accept deposits nor advance loans
Question. Which of the following is not a function of Central Bank?
a) Accept deposits
b) Custodian of foreign exchange
c) Bank of issue
d) Supervision
Answer: (a) Accept deposits
Question. Which of the following is an apex body for banking systemin India?
a)
b) Private Banks
c) Central Banks
d) None of the above
Answer: (c) Central Banks
Question. What does the Central Bank do?
a) Regulates the banking system
b) Operates the monetary system
c) Controls the banking system
d) All of the above
Answer: (d) All of the above
Question. Which of the following is the Central Bank of India?
a)
b)
c)
d) UTI
Answer: (a) RBI
Question. Which of the following is the Central Bank of USA?
a) RBI
b) World Bank
c) Union Bank
d) Federal Reserve System
Answer: (d) Federal Reserve System
Question. Which function of RBI leads to uniformity in note circulation?
(a) Bank of issue
(b) Custodian of cash reserve
(c) Controller of money supply
(d) Banker’s bank
Answer: (a) Bank of issue
Question. RBI has the sole authority to issue currency in India. Which of the following functions is highlighted here?
(a) Custodian of cash reserve
(b) Bank of issue
(c) Banker’s bank
(d) Controller of credit
Answer: (b) Bank of issue
Question. Which of the following is an advantage of “Bank of issue”?
a) Brings uniformity in note circulation
b) Ensures public faith in currency system
c) Stabilization in external and internal value of currency
d) All of the above
Answer: (d) All of the above
Question. Central bank acts as: –
a) An Agent
b) A Banker
c) A Financial advisor
d) All of the above
Answer: (d) All of the above
Question. By carrying out all the banking activities, Central Bank acts as
(a) Banker to the Government
(b) Banker to the people of the Country
(c) Banker to the Private companies
(d) None of the above
Answer: (a) Banker
Question. By managing the responsibility of public debt, Central Bank acts as
(a) A Banker
(b) An Agent
(c) A Financial advisor
(d) None of the above
Answer: (b) An Agent
Read the following statement and choose the correct alternative,
Statement 1- Anything which is generally accepted as a medium of exchange, measure of value and standard of deferred payment is called money
Statement 2- Amount of money held by public and circulated at any period of time is called money} supply
a) Both are correct
b) Both are wrong
c) Only 1 is correct
d) Only 2 is correct
Answer: (c) Only 1 is correct
Question. Read the following statement given below and choose the correct alternative
Statement 1- Currency includes deposits of foreign bank
Statement 2- Demand deposit is payable on demand by bank.
a) Only 1 is correct
b) Only 2 is correct
c) Both are correct
d) None of the above
Answer: (b) Only 2 is correct
Question. Read the following statement given below and choose the correct alternative
Statement 1- Bank is a financial institution which performs only one function i.e. To grant loans and advances
Statement 2- Bank is only commercial in nature.
(a) Both are correct
(b) Both are wrong
(c) Only 1 is correct
(d) Only 2 is correct
Answer: (b) Both are wrong
Question. Read the following statement given below and choose the correct alternative
Statement 1 – In ancient time people didn’t use money for exchanging commodities
Statement 2- Barter system is the system of exchange of goods for goods.
a) Only 1 is correct
b) Only 2 is correct
c) Both are wrong
d) Both are correct
Answer: (d) Both are correct
Question. Read the following statement given below and choose the correct alternative Statement 1- Loss of value was the major demerit of Barter system Statement 2- There was a problem of storage in barter system
a) Both are correct
b) Both are wrong
c) Only 2 is correct
d) None of the above
Answer: (a) Both are correct
Question. “Sales and purchase of foreign exchange has increased tremendously”. Choose the correct reason for the statement
a) Increase in international trade
b) Due to globalisation
c) Usefulness of banks
d) All of the above
Answer: (b) Due to globalisation
Question. “Central bank is an apex bank in the economy”. Choose the correct reason for the above statement
a) It controls the entire banking system
b) It regulates other banks
c) Supervisor of commercial banks
d) All of the above
Answer: (d) All of the above
Read the following statement
Assertion (A) – HDFC is a commercial bank
Reason(R) – It accepts deposits and grants loan
a) Both assertion and reason are true. Reason is the correct explanation of assertion
b) Both assertion and reason are true. Reason is not the true explanation of assertion}
c) Both are wrong
d) Assertion is true but reason is wrong
Answer
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- a) Both assertion and reason are true. Reason is the correct explanation of assertion
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Assertion (A)- RBI is known as issuing authority.
Reason (R)- It has the monopoly power of issuing Currency.
a) Both assertion and reason are true. Reason is not the correct explanation of assertion
b) Both assertion and reason are true. Reason is the correct explanation of assertion
c) Reason is true but assertion is not
d) None of the above
Answer
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- b) Both assertion and reason are true. Reason is the correct explanation of assertion
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Fill in the blanks:
Question. The exchange of goods for goods is called _____ exchange.
Answer: barter
Question.______ is a narrow concept of money.
Answer: M1
Question.________ is a broad concept of money.
Answer: M3
Question._______ are the deposits which are payable by the banks to the customers after a fixed period.
Answer: Time deposits
Question. Currency money is also known as ______ money.
Answer: fiat
Question. Supply of money is a _______ concept.
Answer: stock
Question. The money multiplier is the rate of change in _____ due to initial deposits.
Answer: money supply
Question. Currency with public means _____ and ______ with the public outside the bank.
Answer: coins, currency notes
Question._______ is the Central Bank of India.
Answer: RBI
Question. Commercial banks are an important source of _________ in the economy.
Answer: money supply
Question. Banks serve as a channel between _______ and investors
Answer: depositors
Question. Two essential functions of a bank are accepting deposit and ________
Answer: advancing loan
Question. The Central Bank is the apex institution of the _______ system.
Answer: Monetary
Question. Bank rate is the _______ instrument of Central Bank.
Answer: Quantitative
Question. Central Bank of India is………………..
Answer: Reserve Bank of India
Question. Bank rate is also known as………………..
Answer: Redemption
Question. The bank generates……………….. deposits in credit creation.
Answer: Derivative
Question. When CRR decreases, credit creation………………..
Answer: Increases
Question. The measure of deferred payment is ……………….. function of money.
Answer: Secondary
Question. Medium of exchange is ……………….. function of money.
Answer: Primary
Question. The static and dynamic function of money is divided by………………..
Answer: Paul Einzig
State true or false:
Question. Money as a medium of exchange solves the problem of lack of double coincidence of want.
Answer: True
Question. Legal tender money has a legal sanction behind it by the government.
Answer: True
Question. M1 includes saving deposits of post office savings banks.
Answer: False
Question. The money supply is a flow variable.
Answer: False
Question. Commercial Bank plays no role in stock of money supply in the economy.
Answer: False
Question. Credit money is money received as credit from banks.
Answer: False
Question. Commercial banks do not create money.
Answer: False
Question. Bank rate is a qualitative method of credit control
Answer: False
Question. There is an inverse relation between LRR and the size of the money multiplier.
Answer: True
Question. Money is needed for day-to-day transactions.
Answer: True
Question. The precautionary demand for money increases with the proportionate increase in income.
Answer: True
Question. Reserve Bank of India provides loans to the public.
Answer: False
Question. Along with the Reserve Bank of India, Commercial banks are also authorized to issue currency
Answer: False
Question. Reliable money also includes cheques.
Answer: False
Question. Reserve Bank of India cannot become the owner of any real estate.
Answer: True
Match the following:
Question
| ‘A’ | ‘B’ |
| 1. Primary function of money | (a) Paper money |
| 2. Indian Rupee is | (b) Bad master |
| 3. An institution which deals with money | (c) Measure of value |
| 4. RBI established on | (d) Bank |
| 5. Money is a good servant but | (e) 1 April 1935. |
Answer:
| ‘A’ | ‘B’ |
| 1. Primary function of money | (c) Measure of value |
| 2. Indian Rupee is | (a) Paper money |
| 3. An institution which deals with money | (d) Bank |
| 4. RBI established on | (e) 1 April 1935. |
| 5. Money is a good servant but | (b) Bad master |
Question 2.
| Column-I | Column-II |
| 1. Fiat money | (A) Reserve Bank of India |
| 2. Legal tender | (B) Banking through electronic media |
| 3. Apex bank of India | (C) Must be accepted as a medium of exchange |
| 4. Central bank in India | (D) Statutory Liquidity Ratio |
| 5. E-banking | (E) Circulated with the order of government |
| 6. SLR | (F) Cash Reserve Ratio |
| 7. CRR | (G) Issuing notes |
| 8. Bank rate | (H) The central bank of India |
| 9. Function of commercial bank | (I) Determined by the central bank |
| 10. Function of the central bank | (J) Accepting deposits |
Answer:
| Column-I | Column-II |
| 1. Fiat money | (E) Circulated with the order of government |
| 2. Legal tender | (C) Must be accepted as a medium of exchange |
| 3. Apex bank of India | (H) The central bank of India |
| 4. Central bank in India | (A) Reserve Bank of India |
| 5. E-banking | (B) Banking through electronic media |
| 6. SLR | (D) Statutory Liquidity Ratio |
| 7. CRR | (F) Cash Reserve Ratio |
| 8. Bank rate | (I) Determined by the central bank |
| 9. Function of commercial bank | (J) Accepting deposits |
| 10. Function of the central bank | (G) Issuing notes |
Assertion-Reason Based MCQ
Code
- Both assertion and reason are true and reason is the correct explanation of assertion.
- Both assertion and reason are true but reason is not the correct explanation of assertion.
- Assertion is true but reason is false.
- Assertion is false but reason is true.
Assertion: M1 is the least liquid measure of money supply
Reason: M1 includes the currency in circulation demand deposits with the bank and other deposits with the RBI
Assertion: M4 is the least liquid measure of money supply
Reason: M4 is inclusive of all the money supply include in M3 as well as the total deposits with the post office
Assertion: Demand deposits are not legal tender
Reason: They are with the bank, so only can be used as a legal tender when cheques are issued for the transfer
4. Assertion: Money is what money does
Reason: Money facilitates exchange of goods and services
Assertions-Reason Based MCQ Answers
1. (4)
M1 is the most liquid measure of money supply as it includes all forms of assets that are easily exchangeable as payment for goods and services. It includes coins and currency in circulation, demand deposits, Travellers cheque and other checkable deposits
2. (1)
3. (3)
Legal tender money is that form of money that has a legal sanction by the government behind it. Checkable demand deposits are not legal tender because a person can legally refuse to accept payment through checkable demand deposits
4. (1)
Money is defined as anything that acts as a medium of exchange
Read the Case study given below and answer the following questions.
The central bank of India, RBI is the pinnacle organization that controls the whole monetary market. One of its significant capacities is to keep up with the hold of unfamiliar trade and maintain the reserve of foreign exchange. Likewise, it mediates in the unfamiliar trade market to settle the extreme variance in the unfamiliar conversion scale. As such, the national bank’s must control a country’s economy through financial strategy; if the economy is moving gradually or moving in reverse, there are steps that the national bank can take to help the economy. These means, regardless of whether they are resource buys or printing more cash, all include infusing more money into the economy. The basic organic market financial projection happens and cash will depreciate.
74. RBI uses which of the following tools to maintain the flow of money in domestic economy
a) Quantitative measures
b) Qualitative measures
c) Fiscal measure
d) Both (a) and (b)
Answer: (d) Both (a) and (b)
75. Legal reserve requirement is the sum of ;
a) CRR and SLR
b) Money multiplier and LRR
c) Total deposit and Initial deposit
d) All of the above
Answer: (a) CRR and SLR
76. RBI is the bank of government as
a) It acts as banker
b) It acts as a agent
c) It acts as advisor
d) All of the above
Answer: (d) All of the above
77. RBI regulates banks by
a) Issuing or cancelling license
b) By merging
c) Supervising time to time
d) All of the above
Answer: (d) All of the above
78. Credit creation works on which of the following assumptions
a) All banks are considered single unit
b) All transactions are channelled through bank in cheque
c) Both (a) and (b)
d) None of the above
Answer: (c) Both (a) and (b)
Case-Study Based MCQ
1. Read the following passage and answer accordingly.
In a 40 minute long speech Prime Minister Narendra Modi announced the demonetisation of existing notes of ₹ 500 and ₹ 1000 during a televised address on Tuesday evening. Modi announced that the notes of ₹500 and ₹ 1000 will not be legal tender from midnight tonight and this will be just worthless piece of paper. PM also asked people to join the mahayojana against the ills of corruption.
(i) Under whose purview does the issue of new currency fall in?
(a) Reserve Bank of India
(b) Central Government of India
(c) State Government
(d) All the above
(ii) Which two currency denominations were demonetized
(a) ₹ 100 and ₹ 500
(b) ₹ 500 and ₹ 2000
(c) ₹ 1000 and ₹ 2000
(d) ₹ 500 and ₹ 1000
(iii) _________ is issued by the government of India .
(a) Coins
(b) ₹ 500 notes
(c) ₹ 1000 notes
(d) All of these
(iv) ₹1 currency note is issued by ________
(a) Finance ministry
(b) RBI
(c) Niti Aayog
(d) None of these
2. Read the following passage and answer accordingly.
On March 5, 2020, the Reserve Bank of India (RBI) imposed a 30-day moratorium on YES Bank, superseded the private-sector lender’s board, and appointed Prashant Kumar, who was serving as chief financial officer and deputy managing director at State Bank of India (SBI), as an administrator.
Under the terms of the moratorium, deposit withdrawals were capped at Rs 50,000 per person. The central bank proposed a reconstruction scheme under which SBI might take a maximum of 49% stake in the restructured capital of the bank.
Analysts believed the new management of YES Bank, headed by former Deutsche Bank India head Ravneet Gill, who joined the bank in early 2019, could turn around the ship. Gill, however, has struggled to do so.
The banks loan book on March 31, 2014, was ₹ 55,633 crore, and its deposits were ₹74,192 crore. Since then, the loan book has grown to nearly four times as much, at 2.25 billion as on September 30, 2019.
While deposit growth failed to keep pace and increased at less than three times to ₹ 2.10 trillion. The bank’s asset quality also worsened and it came under regulator RBI’s scanner.
YES Bank has a substantial exposure to several troubled borrowers, including the Anil Ambani-led Reliance group, DHFL and IL&FS. The tipping point came when one of the banks independent directors, Uttam Prakash Agarwal, resigned from the board in January 2020 citing governance issues.
(i) Which of the following function has been performed by the RBI in the above case study?
(a) Banker to the Commercial Bank, here YES Bank
(b) Supervision and Regulation of the Commercial Bank, here YES Bank
(c) Controlling credit creation in the economy.
(d) Managerial function
(ii) Under the moratorium, the deposit withdrawal was capped at
(a) ₹ 10000
(b) ₹ 5,OOO
(c) ₹ 30000
(d) ₹ 60,000
(iii)Read the following statements.
Assertion: YES Bank put into the check of the RBI.
Reason: The loan book has grown to nearly four times and deposit failed to grow.
Select the correct alternative from the following:
(a)Both Assertion and Reason are true, and Reason is the correct explanation of Assertion .
(b) Both Assertion and Reason are true, but Reason is not the correct explanation of Assertion.
(c) Assertion is true, but Reason is false.
(d) Assertion is false, but Reason is true.
(iv) What another role does the RBI play for the Commercial Banks like YES Bank?
(a) Advisor to the Bank
(b) Banker to the Bank
(c) Controls the credit created by the bank
(d) All of the above
Case-Study Based MCQ Answers
1.
(i) (a)
The central bank plays the role of the sole note issuing authority in the economy
(ii) (d)
(iii) (a)
It is the sole responsibility of the Government of India to mint coins of all denominations.
(iv) (a)
The one rupee note and coins are issued by Ministry of Finance and it bears the signature of Finance secretary.
2.
(i) (b)
(ii) (d)
(iii) (a)
The loan book has grown to nearly four times as much, at ₹2.25 trillion as on September 30, 2019. While deposit growth failed to keep pace and increased at less than three times to ₹2.10 trillion
(iv) (d)
Central Bank, as the Banker’s bank, accepts deposits from the commercial banks and offers them loans as and when required. As the agent and advisor to the government, it manages public debt on behalf of the government and also advises on policy matters. Central bank control credit creation to remove causes responsible for instability in price fluctuations which inturn are related to the supply of money