MCQ Questions for Class 12 Economics Chapter 3 Money and Banking with Answers

Students who are searching for NCERT MCQ Questions for Class 12 Economics Chapter 3 Money and Banking with Answers Pdf free download are compiled here to get good practice on all fundamentals. Know your preparation level on MCQ Questions for Class 12 Economics with Answers. You can also verify your answers from our provided Money and Banking Class 12 MCQs Questions with Answers. So, ace up your preparation with MCQ on Money and Banking Class 12 Objective Questions.

Money and Banking Class 12 MCQs Questions with Answers

Choose the correct alternative.

Question 1.
_______ is the primary function of money.
(a) Transfer of value
(b) Medium of exchange
(c) Standard of deferred payment
(d) Store of value

Answer

Answer: (b) Medium of exchange


Question 2.
Initial deposits made by the people from their own resources are called
(a) time deposits
(b) secondary deposits
(c) primary deposits
(d) term deposits

Answer

Answer: (c) primary deposits


Question 3.
The monetary policy generally targets to ensure _______
(a) Price stability in the economy
(b) employment generation in the country
(c) stable foreign relations
(d) greater tax collections for the government

Answer

Answer: (a) Price stability in the economy


Question 4.
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

Answer: (a) Reduce Cash Reserve Ratio


Question 5.
Banks are able to create credit many times more than initial deposits through
(a) secondary deposits
(b) providing overdraft facilities
(c) accepting deposits
(d) advancing loans

Answer

Answer: (a) secondary deposits


Question 6.
The creation is called credit creation.
(a) time deposits
(b) primary deposits
(c) secondary deposits
(d) None of these

Answer

Answer: (c) secondary deposits


Question 7.
The ratio of total deposit that a commercial bank has to keep with the Reserve Bank of India is called
(a) Statutory Liquidity Ratio
(b) Deposit Ratio
(c) Cash Reserve Ratio
(d) Legal Reserve Ratio

Answer

Answer: (c) Cash Reserve Ratio


Question 8.
Credit creation by the commercial bank is determined by
(a) Cash Reserve Ratio
(b) Statutory Liquidity Ratio
(c) Initial Deposits
(d) all of the above

Answer

Answer: (d) all of the above


Question 9.
______ is the rate of interest charged by the central bank on loans given to the commercial bank.
(a) Bank Rate
(b) Cash Reserve Ratio
(c) Statutory Liquidity Ratio
(d) Reverse Repo Rate

Answer

Answer: (a) Bank Rate


Question 10.
_______ is the main function of Central Bank.
(a) Notes issue
(b) Credit creation
(c) Accepting deposits from the public
(d) Advancing loans to public

Answer

Answer: (a) Notes issue


Fill in the blanks with the correct word.

Question 11.
The exchange of goods for goods is called _______ exchange.

Answer

Answer: barter


Question 12.
Cheque, draft, etc. are _______ money.

Answer

Answer: credit


Question 13.
Bond, insurance, securities, etc. are examples of _______ money.

Answer

Answer: near


Question 14.
Indian monetary system is based on ______ standard.

Answer

Answer: paper currency


Question 15.
Supply of money is a _________ concept.

Answer

Answer: stock


Question 16.
______ is the Central Bank of India.

Answer

Answer: RBI


Question 17.
Commercial banks are an important source of ________ in the economy.

Answer

Answer: money supply


Question 18.
A ________ bank is a financial institution which accepts deposits from the people and gives loans for the purpose of consumption and investment.

Answer

Answer: commercial


Question 19.
Value of money multiplier _______ with an increase in Cash Reserve Ratio.

Answer

Answer: decreases


Question 20.
Quantitative instruments are also known as ______ instruments.

Answer

Answer: general


Question 21.
Qualitative instruments are also known as _______ instruments.

Answer

Answer: selective


Question 22.
The design and control of India’s monetary policy is the main responsibility of the ________

Answer

Answer: central bank


Question 23.
Two essential functions of a bank are accepting deposit and _________

Answer

Answer: advancing loan


Question 24.
_________ means buying and selling of government securities in the market.

Answer

Answer: Open market operations


Question 25.
Bank rate is the ________ instrument of Central Bank.

Answer

Answer: quantitative


State whether the following statements are true or false. Give reasons.

Question 26.
Money as a medium of exchange solves the problem of lack of double coincidence of want.

Answer

Answer: True
Goods can be sold for money to whoever wants it and from whoever wants to sell it.


Question 27.
Legal tender money has a legal sanction behind it by the government.

Answer

Answer: True
No one can refuse to accept it as non-acceptance is an offense.


Question 28.
M1 includes saving deposits of post office savings banks.

Answer

Answer: False
Saving deposits with the post office are a part of M2.


Question 29.
The money supply is a flow variable.

Answer

Answer: False
The money supply is a stock variable as it is measured at a particular point in time.


Question 30.
Commercial Banks play no role in the stock of money supply in the economy.

Answer

Answer: False
Commercial banks add to the stock of money supply by creating credit.


Question 31.
Credit money is money received as credit from banks.

Answer

Answer: False
Credit money is money whose face value is more than its intrinsic (commodity) value.


Question 32.
Commercial banks do not create money.

Answer

Answer: False
Commercial banks add to the money supply by creating demand deposits.


Question 33.
Bank rate is a qualitative method of credit control.

Answer

Answer: False
Bank rate is a quantitative method of credit control as it aims at influencing the volume of credit.


Question 34.
There is an inverse relation between LRR and the size of the money multiplier.

Answer

Answer: True
Higher the LRR, the lower is the money multiplier and vice-versa.


Match the alternatives given in Column II with respective terms in Column I.

Question 35.

Column I Column II
(i) M1 + Deposit with post office saving bank account (a) Open Market Operations
(ii) M1 + Time deposits with the bank (b) Advancing Loans
(iii) Quantitative Instrument of monetary policy (c) Lender of the Last Resort
(iv) Qualitative Instrument of monetary policy (d) M2
(v) Function of commercial bank (e) M3
(vi) Function of the central bank (f) Margin Requirement
Answer

Answer:

Column I Column II
(i) M1 + Deposit with post office saving bank account (d) M2
(ii) M1 + Time deposits with bank (e) M3
(iii) Quantitative Instrument of monetary policy (a) Open Market Operations
(iv) Qualitative Instrument of monetary policy (f) Margin Requirement
(v) Function of commercial bank (b) Advancing Loans
(vi) Function of the central bank (c) Lender of the Last Resort

Use the above-provided NCERT MCQ Questions for Class 12 Economics Chapter 3 Money and Banking with Answers Pdf free download and get a good grip on the fundamentals. Need any support from our end during the preparation of CBSE Class 12 Economics Money and Banking MCQs Multiple Choice Questions with Answers then leave your comments below. We’ll revert back to you soon.

error: Content is protected !!