MCQ Question for Class 12 Economics Chapter 9 Money and Banking

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Money and Banking Class 12 Economics MCQ Questions with Answers

Refer below for MCQ Class 12 Economics Chapter 9 Money and Banking with solutions. Solve questions and compare with the answers provided below

Money and Banking Class 12 MCQ pdf download have been gathered for students to rehearse. Students can prepare this Money MCQ Class 12. Each question has four choices with answers. Firstly, Solve all these Questions and check your answer with the given answer. If your answers do not match with the right answer, Don’t worry try again because You need to prepare daily to score higher marks in the Class 12 Chemistry Exam.

Question. Supply of money refers to quantity of money –
(a) As on 31st March
(b) During any specified period of time
(c) As on any point of time
(d) During a fiscal year

Question. Money supply includes _
(a) All deposits in bank
(b) Only demand deposits in banks
(c) Only time deposits in banks
(d) Currency with the banks

Question. Who regulates money supply in India?
(a) Government of India
(b) Reserve Bank of India
(c) Planning Commission
(d) NITI Aayog

Question. . __ is the main source of money supply in an economy.
(a) Central Bank
(b) Commercial Banks
(c) Government
(d) Both a and b

Question.  _ is the primary function of money.
(a) transfer of value
(b) medium of exchange
(c) standard of deferred payment
(d) store of value

Question. The creation of __ is called credit creation.
(a) time deposits
(b) primary deposits
(c) secondary deposits
(d) none of these

Question. Limitation of barter system of exchange
(a) lack of unit of value
(b) lack of store of value
(c) lack of standard of deferred payments
(d) all of these

Question. High powered money includes –
(a) currency and demand deposits
(b) demand deposits and saving deposits
(c) currency held by public and cash reserves with banks
(d) none of these

Question. Money supply is a __ concept.
(a) Flow
(b) Stock
(c) Variable
(d) All of these

Question. _ are called legal tenders.
(a) demand deposits
(b) time deposits
(c) inter-bank deposits
(d) currency notes and coins

Question. Which one of these is a limitation of the barter exchange?
(a) lack of double coincidence of wants
(b) lack of store of value
(c) lack of a common measure of value
(d) All of these

Question. This function of the Central Bank involves buying and selling of government securities from or to the public.
(a) Selective Credit Controls
(b) Legal Reserve Requirements
(c) Open Market Operations
(d) None of these

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

Question. Which out of the following items is not included in the money supply of a country?
(a) Time deposits
(b) Coins and Currency
(c) Demand Deposits
(d) None

Question. Which of the following deposits are also known as chequable deposits?
(a) Saving Account Deposits
(b) Demand Deposits
(c) Saving Account deposits plus fixed account deposits
(d) Current Account Deposits

Question. Giving permission to withdraw money by an amount more than deposited to is known as ______
(a) Overdraft
(b) Advance
(c) Loan
(d) None of these

Question. Quantitative measures/instruments of monetary policy (Policy of Central Bank) focuses on:
(a) quantity of money across selected sectors of the economy
(b) Quantity of money in the economy
(c) inflationary and deflationary gaps in the economy
(d) Both b) and c)

Question. Credit Multiplier is:
(a) 1/CRR
(b) 1*CRR/10
(c) Cash * CRR
(d) None of these

Question. Which one of the following is true?
(a) Bank rate is the rate at which central bank is ready to give credit to commercial bank
(b) Bank rate and interest rates are different
(c) Bank rate is the discount rate of the central bank
(d) All of the above

Question. Credit money is increased when CRR:
(a) Falls
(b) Rises
(c) Both a) and b)
(d) None of these

Question. The system, wherein trade can be carried out through the exchange of goods and services is called the: –
(a) Barter system
(b) Monetary system
(c) Goods system
(d) None of the above

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

Question. A owns a camel that he wants to trade for a goat. However, there are no sellers of goats 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

Question. Money, comprises of which of the following, which assist in conducting business transactions: – contains:
(a) Coins
(b) Currency notes
(c) Cheques
(d) All of the above

Question. Which of the following is not a measure of money supply ?
(a) M1
(b) M0
(c) M2
(d) M4

Question. Which of the following is the least liquid form of money supply ?
(a) M1
(b) M2
(c) M4 
(d) M3

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

Question. Which of the following is not a Commercial Bank ?
(a) State bank of India ;
(b) Punjab National Bank ;
(c) RBI ;
(d) Canara Bank .

Question. The fraction of deposits to be kept by the bank, which cannot be given as loans is called
(a) LRR 
(b) SLR
(c) CRR
(d) None of the above

Question. What are the total deposits if LRR is 25% and initial deposits are Rs. 100000?
(a) 250000
(b) 400000 
(c) 500000
(d) 800000

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

Question. Who regulate money supply in India
(a) Reserve Bank of India
(b) Government of India
(c) Commercial banks
(d) Planning Commission

Question. What type of loan is advanced by Commercial Banks ?
(a) Cash Credit
(b) Overdraft
(c) Loan and Advance
(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) Hawtrey

Question. Which of the following is the function of Central Bank ?
(a) Monopoly of Note Issue
(b) Banker of the Government
(c) Custodian of Foreign Exchange Reserves
(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

Question. The main function of commercial bank is :
(a) Credit control
(b) Loaning to other banks
(c) Accept deposits from customers
(d) All the above

Question. Which of the following issue paper currency in the country ?
(a) Central Bank 
(b) Commercial Bank
(c) World Bank
(d) Industrial Bank

Question. Which committee was constituted for suggesting consumer service improvements in banks ?
(a) Raja Chelliah Committee
(b) Chakrabarty Committee
(c) Verma Committee
(d) Goiporia Committee

Question. Who is the guardian of Indian Banking System:
(a) Reserve Bank of India
(b) State Bank of India
(c) Unit Trust of India
(d) Life Insurance Company of India.

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.

Question. Who is the custodian of Indian Banking system ?
(a) Reserve Bank of India
(b) State Bank of India
(c) Unit Trust of India
(d) LIC of India

Question. 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.

Question. What is Central Bank of India ?
(a) Commercial Bank
(b) Central Bank
(c) Private Bank
(d) None of these

Question. Assertion (A): Higher the value of LRR, the higher the value of total deposits that are generated in the economy.
Reason (R): There exists an inverse relation between Money Multiplier and LRR.
Alternatives:-
(a) Both Assertions (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is True but Reason (R) is False
(d) Assertion (A) is False but Reason (R) is True

Question. Assertion (A): Currency held by the public is a monetary liability of a central bank.
Reason (R): Central Bank controls credit, whereas commercial bank creates credit with the deposits.
Alternatives:-
(a) Both Assertions (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is True but Reason (R) is False
(d) Assertion (A) is False but Reason (R) is True

Question. Assertion (A): Quantitative tools include persuasion by the central bank in order to make commercial banks discourage or encourage lending.
Reason (R): Quantitative tools control the extent of the money supply by changing the Cash Reserve Ratio (CRR) or Statutory Liquidity Ratio (SLR) or Bank Rate or Repo Rate or Reverse Repo Rate, or through Open market operations (OMO).
Alternatives:-
(a) Both Assertions (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is True but Reason (R) is False
(d) Assertion (A) is False but Reason (R) is True

Question. Assertion (A): Besides the central banks, commercial banks are the other type of institutions that are a part of the money-creating system of the economy.
Reason (R): Commercial banks accept deposits from the public and lend out part of these funds to those who want to borrow.
Alternatives:-
(a) Both Assertions (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is True but Reason (R) is False
(d) Assertion (A) is False but Reason (R) is True

Question. Assertion (A): LRR is the fraction of deposits that are kept with the central bank as cash reserves.
Reason (R): The value of LRR is decided by the central bank.
Alternatives:-
(a) Both Assertions (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is True but Reason (R) is False
(d) Assertion (A) is False but Reason (R) is True

Question. Assertion (A): Credit creation is inversely related to the money multiplier.
Reason (R): Credit creation = Initial Deposits × Money Multiplier (1/LRR). With the same initial deposit total credit, creation decreases with a decrease in the value of the money multiplier.
Alternatives:-
(a) Both Assertions (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is True but Reason (R) is False
(d) Assertion (A) is False but Reason (R) is True

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