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MONEY AND BANKING REASON AND ASSERTION BASED
Q.1 Assertion : Repo rate is fixed by the Reserve bank of India , while Reverse repo rate is fixed
by the commercial bank themselves.
Reason: Both repo rate and reverse repo rate is fixed by the Reserve bank of India ,as it is an
apex bank.
1. Both Assertion(A) and Reason (R) are true and Reason(R) is the correct explanation of
Assertion(A)
2. Both Assertion(A) and Reason (R) are true and Reason(R) is the not correct explanation of
Assertion(A).
3. Assertion(A) is true but Reason(R) is false.
4. Assertion (A) is false but Reason (R) is true.
Ans : 4 . Assertion (A) is false but Reason (R) is true.
Q.2 Assertion (A):

Commercial banks contribute to quantum of money supply in the economy through credit
creation.
Reason(R): As they do have note-issuing authority.
Alternatives:
(a) Both Assertion (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
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.
Ans – (C)
Q.3 Read the following statements - Assertion (A) and Reason (R). Choose
one of the correct alternatives given below:
Assertion (A): The monetary policy is a policy formulated by the central bank.
Reason (R): The policy involves measures taken to regulate the supply of money, availability,
and cost of credit in the economy.
Alternatives:
a. Both Assertion (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
c. Assertion (A) is true but Reason (R) is false.
d. Assertion (A) is false but Reason (R) is true.
Answer : a. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion (A)
Q.4 Assertion : The modern currency is used as a medium of exchange; however, it does not
have a use of its own.
Reason : Modem currency is easy to carry
A : both A and R are true but R is the correct explanation of assertion

B: both A and R are true but R is not the correct explanation of A
C: A is true but R is false
D: A is false but R is true
Ans : (b) Both assertion and reason are true, but reason is not the correct explanation of
assertion. The modern currency is used as a medium of exchange because it is accepted and
authorized as a medium of exchange by a country‘s government.
Q.5 Assertion : Banks charge a higher interest rate on loans than what they offer on deposits.
Reason : The difference between what is charged from borrowers and what is paid to depositors
is their main source of income.
A : A and R are true. R is the correct explanation of A

B: A and R are true but R is not the correct explanation of A
C: A is true but R is false
D: A is false but R is true
Q.6 ASSERTION (A) : Money Multiplier refers to the process of creation of credit by the
commercial Bank.
REASONING (R): Money creation by commercial bank raises the National Income
a. Both A and R are true and R is the correct explanation of A

b. Both A and R are true and R is not the correct explanation of A
c. A is true, but R is false
d. A is false, but R is True
ANS: b
Q.7 Assertion(A): Cheques are fiduciary money
Reason(R): It is issued by the government
Solution: A is true and R is false

Fiduciary money is accepted as a means of payment on the basis of trust. So cheques are
considered as fiduciary money. Fiat money are the money issued by authority of the government
Q.8 Assertion (A): Money is a link between the present and the future.
Reason (R): Money is a store of value.
Both A and R are true and R is the correct explanation of A.

Both A and R are individually true but R is the not the correct explanation of A.
A is true but R is false.
A is false but R is true.
Q.9 . Read the following statements Assertion (A) and Reason (R). Choose one of the correct
alternatives given below
Assertion (A) – Central bank as a banker to the government, works as a custodian of cash
reserves.
Reason (R)- The central bank acts as a clearing house for transfer and settlement of mutual
claims of commercial banks.
Alternatives
Assertion (A)
(b) Both Assertion (A) and Reason (R) are true, but 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
Ans - b
Q10. Mark the option which is most suitable:

(a) If both assertion and reason are true and reason is the correct explanation of assertion.
(b) If both assertion and reason are true, but reason is not the correct explanation of assertion.
(c) If assertion is true but reason is false.
(d) If both assertion and reason are false.
Assertion: To curb inflation , the RBI should sell the Government securities.
Reason: When RBI will sell Government securities to the people and commercial banks then
money will flow to RBI which reduces the lending capacity of commercial banks.
Ans : Both assertion and reason are true and reason is the correct explanation of assertion.
Q.11 Assertion (A) : Bank is a service institution.

Reason (R) : Commercial Bank is an institutions that provides accepting deposits and providing
loans to the public
a. Both 'A' and 'R' are true and 'R' is the correct explanation of 'A'.
b. Both 'A' and 'R' are true but 'R' is not the correct explanation of 'A'.
c. 'A' is true but 'R' is false.
d. 'A' is false but 'R' is true.
Answer: (d)
Q.12 Read the following statements - Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:
Assertion (A): An increase in CRR results in decrease in the value of Multiplier.

Reason (R): Banks lend money many times more than their cash reserves.
Alternatives:
a. Both Assertion (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)
Ans. b. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
Q13. Mark the option which is most suitable:

(a) If both assertion and reason are true and reason is the correct explanation of assertion.
(b) If both assertion and reason are true, but reason is not the correct explanation of assertion.
(c) If assertion is true but reason is false.
(d) If both assertion and reason are false.
Assertion: To curb inflation , the RBI should sell the Government securities.
Reason: When RBI will sell Government securities to the people and commercial banks then
money will flow to RBI which reduces the lending capacity of commercial banks.
Ans : Both assertion and reason are true and reason is the correct explanation of assertion.
Assertion (A): The monetary policy is a policy formulated by the central bank.
Reason (R): The policy involves measures taken to regulate the supply of money, availability,
and cost of credit in the economy.
Alternatives:
a. Both Assertion (A) and Reason (R) are true and Reason (R) is the
Answer : a. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
Q.15 Read the following statements. Assertion (A) and reason (R). Choose one of the correct
alternative given below:
Assertion (A) : in order to maintain the faith of depositers in banking system, it is sufficient for
the commercial banks to keep only a small part of deposits as cash Reserves.
Reason (R) : A change in Reserve requirement affects the power of commercial bank to create
the credit.
Both Assertion (A) and reason (R) are true and reason is the correct explanation of assertion
Both assertion (A) and reason (R) are true and the reason (R) is not the correct explanation of
assertion (A)
Assertion (A) is it true but the reason (R) is false
Assertion (A) is false but reason (R) is true.
Answer: b. Both assertion (A) and reason (R) are true and the reason (R) is not the correct
explanation of assertion (A)
Q.16 Read the following statements Assertion(A) and Reason(R). Choose one of the correct
alternatives given below:-
Assertion: Central bank uses many tools such as Bank rate, repo rate, reverse repo rate etc. to
control money supply in the economy.
Reason: Commercial bank is the apex Bank of India.
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
Answer:——-c
Assertion (A): Supply of money is a stock variable
Reason (R): Supply of money is measured over a period of time, usually a fiscal year
a. Both Assertion (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.
Answer: (c)
Q.18 Read the following statements - Assertion (A) and Reason (R).
Choose one of the correct alternatives given below:

Assertion (A): Size of multiplier is given by the inverse of LRR
Reason(R): There is direct relationship between LRR and value of money multiplier
Alternatives:
Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of
Assertion
(c) Assertion (A) is true but Reason (R) is false
Ans Option c
Q.19 Assertion(A ) The central bank issues currency on the basis of CRR.
(1 M)
Reason (R ) The CRR impacts credit creation capacity of the commercial bank.
Both Assertion and Reason are true and Reason is the correct explanation of Assertion.
Both Assertion and Reason are true and Reason is not correct explanation of the Assertion
Assertion is true but Reason is false
Assertion is false and Reason is true.
Answer: D
Q.20 Assertion: Money Supply is a flow concept.

Reason: Money Supply is measured at a particular point of time.
Both assertion and reason are true and reason is the correct explanation of the assertion.
Both assertion and reason are true but reason is not the correct explanation of the assertion.
Assertion is true but reason is false.
Assertion is false but reason is true.
Answer : D
Q.21
A. If both assertion and reason are true, and reason is the correct explanation of assertion.
B. If Both assertion are true but reason is not the correct explanation of assertion.
C. If assertion is true, but reason is false
D. If both assertion and reason are false.
Assertion: The Reserve bank of India had in march 2020,offered a three month moratorium on
loans enabling borrowers to defer repayments on EMI and other loans.
Reason: The loan moratorium was aimed at providing borrowers relief aimed the economic
impact of the covid-19 pandemic.
Ans. A.
Q.22 Assertion: The Central Bank as a Supervisor regulates and controls the commercial banks.
The control is exercised by periodic inspection of banks and the returns filed by them.
Reason: The RBI has fined IndusInd Bank Rs.4.5 crore for non-compliance of certain norms like
Exposure norms, Prudential Norms on Income Recognition etc.. among others. RBI has clarified
that the deficiencies were in regulatory compliance and not in customer bank transactions. ----
The Financial Express, 18 October 2020.
Alternatives:
a. Both Assertion (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.
Ans. (a)-Both Assertion (A) and Reason (R)are true and Reason (R) is the correct explanation of
Assertion (A).
Q.23
Assertion – Central Bank is the ‗Lender of last Resort‘.
Reason – It is ready to lend to banks, when bank faced severe crises. If central bank refuses,
there is no option for the banks but to shut down.
a. Both Assertion and Reason are True and Reason is the correct explanation of assertion
b. Both Assertion and Reason are True and Reason is not the correct explanation of assertion
c. Assertion is true but reason is false
d. Assertion is false but reason is true
ANS- A
Q.24 Assertion- To reduce the volume of credit, bank rate should be reduced.
Reason- A rise in bank rate implies that the cost of money would go up.
Both Assertion and Reason are true and reason is the correct explanation of assertion.
Assertion is false but Reason is true.
Both Assertion and reason are false.
Correct answer is option (b)
Q. 25
Assertion- Money is a good servant but a bad master
Reason- Without the additional supply of goods and services, the purchasing power of money
falls.
Both Assertion and Reason are true and reason is the correct explanation of assertion
Both Assertion and reason are false.
Correct answer is option (a)
Q.26 Assertion: Currency held by public is a monetary liability of central bank.
Reason: Central bank controls credit, whereas commercial banks creates credit with the currency
held by public.
(i) Both Assertion and Reason are true and Reason is the correct explanation of Assertion.
(ii) Both Assertion and Reason are true but Reason is not the correct explanation of Assertion.
(iii) Assertion is true but Reason is false.
(iv) Assertion is false but Reason is true.
Ans: (ii) Both Assertion and Reason are true but Reason is not the correct explanation of
Assertion.
Q.27 (A) Money supply does not include money held by Government and Commercial Banks
(R) Government and Commercial Banks are themselves the supplier of money.
(a} Both A and R are true and R is the correct explanation of A

(b) Both A and R are true and R is not the correct explanation of A
© A is true R is false
(d) A is false R is true
ANSWER (a)
Q.28 (A) Central Bank is the banker of the government works as the custodian of cash reserves.
(R) The central bank works for mutual settlement of claims of commercial banks as clearing
house.
(a} Both A and R are true and R is the correct explanation of A
(b) Both A and R are true and R is not the correct explanation of A
(c) A is true R is false
(d) A is false R is true
ANSWER (b)
Q.29 ASSERTION (A): The rate of interest paid by the Central Bank on surplus funds deposited
by commercial banks is called Reverse Repo Rate
REASONING (R) : When Reverse Repo Rate is raised, it encourages the commercial banks to
park their funds with the central bank.
b. . Both A and R are true and R is not the correct explanation of A
Ans: b
Q.30 ASSERTION (A) : Money Supply refers to total volume of money held by public at a
particular point of time in an economy.
REASON(R): Money Supply serves as the base for the generation of demand deposits.
a) Both A and R are true and R is the correct explanation of A.

b) Both A and R are true and R is the not correct explanation of A.
c) A is true but R is false.
d) Both A and R are false. Ans. c) A is true but R is false.
Q.31 Assertion: Currency held by public is a monetary liability of central bank.
Reason: Central bank controls credit, whereas commercial banks creates credit with the currency
held by public.
(i) Both Assertion and Reason are true and Reason is the correct explanation of Assertion.
(ii) Both Assertion and Reason are true but Reason is not the correct explanation of Assertion.
(iii) Assertion is true but Reason is false.
(iv) Assertion is false but Reason is true.
Ans: (ii) Both Assertion and Reason are true but Reason is not the correct explanation of
Assertion.
Q.32
Assertion- To reduce the volume of credit, bank rate should be reduced.
Reason- A rise in bank rate implies that the cost of money would go up.
Both Assertion and reason are false. Correct answer is option (b)
Q.33
Assertion- Money is a good servant but a bad master
Reason- Without the additional supply of goods and services, the purchasing power of money
falls.
Both Assertion and reason are false. Correct answer is option (a)
Q.34
Assertion (A): In India, CRR is determined not by the commercial banks themselves but by the
RBI (Reserve Bank of India). Therefore, it is also called LRR
(Legal Reserve Ratio)
Reason (R): the commercial banks are required to keep the stipulated
(legally required) cash reserves not with themselves, but with the RBI
(of course, the banks can keep excess reserves as 'vault cash' with themselves.
Alternatives:
Assertion (A)
b. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of
Assertion (A)
d. Assertion (A) is false but Reason (R) is true
Ans. b. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
Q.35 Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Alternatives:
Assertion (A)
Assertion (A)
( A ) Money is the commonly accepted medium of exchange.

( R ) An economy with one individual has no role of money.
Ans: a
Q.36 ( A ) Money supply in money in circulation at a given time in an economy.

(R ) Money supply is a flow concept.
Ans: c
Q.37 ( A ) The currency issued by the central bank can be held by the
public or by the commercial banks.
( R ) High powered money acts as a basis for credit creation.
Ans. a
Q.38 ( A ) Commercial banks are a part of the money-creating system of the economy.
( R ) The banks can go on creating as much money as they want.
Ans. C
Q.39 Assertion(A):Since the end of March, currency held by the public rose 8.2% compared with a
4.1% increase in term deposits.
Reason (R): Money Supply will increase.
Assertion(A).
(b) BothAssertion(A)andReason(R)aretrueandReason(R)isnotthecorrectexplanationofAssertion
(A).
(d) Assertion (A) is false but Reason (R) is true
● Ans: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion(A).
Q.40 Assertion(A): One of the functions of the RBI is Banker‘s Bank and Supervisor
Reason (R) : The work of the function of the RBI is to be the custodian of cash reserves, become the
lender of the las resort and clearing house.
Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion(A).
BothAssertion(A)andReason(R)aretrueandReason(R)isnotthecorrectexplanationofAssertion
Assertion (A) is true but Reason (R) is false.
Assertion (A) is false but Reason (R) is true.
Ans: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion(A)..
Q.41
Assertion (A) - High powered money is referred as monetary base of the country.
Reason (R) – High powered money is currency held by the public and demand deposits with
banks.
a. Both A and R are true and R is the correct explanation of A.
b. Both A and R are true but R is not the correct explanation of A.
c. A is true but R is false.
d. A is false but R is true.
Correct Answer: Option c
Q.42
a. If Both assertion and reason are True, and reason is the correct explanation of assertion.
b. If Both assertion and reason are True, and reason is not the correct explanation of assertion.
c. If assertion is True, but reason is false.
d. If both assertion and reason are false
Assertion: Bank charge a higher interest rate on loans then what they offer on deposits.
Reason: The difference between what is charged from borrowers and what is paid to depositors
is their main source of Income.
Ans: (a) Both assertion and reason are True, and reason is the correct explanation of assertion.
Q.43 Read the following statements - Assertion (A) and Reason (R). Choose one of (1)
the correct alternatives given below:
Assertion (A): There is a limit to money or credit creation by banks and this is
determined by the Central bank (RBI).
Reason (R): The RBI decides a certain percentage of deposits which every bank
must keep as reserves. This is done to ensure that no bank is ‗over lending‘.
This is a legal requirement and is binding on the banks.
Alternatives:
a. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
b. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
Answer: a
Q.44 Assertion (A) : All financial institutions can also be termed as banking institutions.
Reason (R): Banks accept deposits from public and grant loans.
a) Both (A) and (R) are true and (R)is the correct explanation of (A)
b) Both (A) and (R) are true and (R) is not the correct explanation of (A)
c) Both (A) and (R) are false
d) (A) is wrong (R) is true Ans: d) (A) is wrong (R) is true
Q.45 Assertion (A): Money supply includes demand deposits of the people with the commercial
banks.
Reason (R): Demand deposits of the people with the commercia l banks is a component of
money supply. Because, these deposits are converted in cash just by writing a cheque.
a. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion(A)
explanation of Assertion(A)
Assertion (A) is false but Reason (R) is true. Answer a.
Q.46 Choose one of the correct alternatives given below:

Assertion (A): RBI serves as a clearing house for commercial banks
Reason(R): Commercial banks keep cash reserves with RBI which enables it to settle claims
against each other.
Alternatives:
(a) Both Assertion (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)
(d) Assertion (A) is false but Reason (R) is true. Ans-a
Q.47 Read the following statements- Assertion (A) and Reason (R). Choose one of the correct
Assertion (A): Currency notes and Coins are legal tender money.
Reason (R): Demand deposits are called legal tenders.
(a) Both Assertion (A) and Reason (R) are true and the Reason (R) is the correct explanation of
Assertion (A)
(b) Both Assertion (A) and Reason (R) are true and the Reason (R) is not the correct explanation of
Assertion (A)
(d) Assertion (A) is false but Reason (R) is true
Ans- Assertion (A) is true but Reason (R) is false
Q.48 Read the following statements- Assertion (A) and Reason (R). Choose one of the correct alternatives
given below:
Assertion (A): If LRR is 12.5%, the value of multiplier will be 5.
Reason (R): Credit Multiplier = 1/LRR.
(a) Both Assertion (A) and Reason (R) are true and the Reason (R) is the correct explanation of
Assertion (A)
(b) Both Assertion (A) and Reason (R) are true and the Reason (R) is not the correct explanation of
Assertion (A)
Assertion (A) is false but Reason (R) is true Ans- Assertion (A) is false but Reason (R) is true
Q.49
ASSERTION(A): if a commercial bank is faced with the financial crisis the only institution that
can finally come to its rescue is a Central Bank.
Reason(R) : Central Bank has the sole right to issue currency notes.
1.Both Assertion (A)and Reason (R )are true and Reason(R) is the correct explanation of
assertion(A).
2. Both Assertion (A)and Reason ( R) are true but reason ( R )is not the correct explanation of
Assertion (A).
3. Assertion (A) is true but reason( R )is false.
4.Assertion (A) is false but reason ( R) is true.
ANSWER 1.Both Assertion (A)and Reason (R )are true but Reason(R) is not the correct
explanation of assertion (A).
Q.50 Assertion (A): To reduce the volume of credit, the central bank should purchase government
securities.
Reason (R): Central bank increases Bank rate in case of inflation.
a. Both Assertion (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.  
Ans: d. Assertion (A) is false but Reason (R) is true.
Q.51
Assertion (A): Market rate of interest tends to be positively related to the bank rate.
Reasoning (R): The bank rate is the rate at which the central bank of the country offers loans to
the commercial banks by discounting the securities.
a. Both (A) and (R) are true and (R) is the correct explanation of (A).
b. Both (A) and (R) are true and (R) is not the correct explanation of (A).
c. (A) is true, but (R) is false
d. (A) is false, but (R) is true ANSWER: (a)
Q.52 Assertion: Demand Deposits in the bank are a form of money.

Reason: People have the provision to withdraw them as and when required.
a) Both A and R are true and R is the correct explanation of A .
b) Both A and R are true but R is not the correct explanation of A.
c)A is correct but R is wrong.
d) A is wrong but R is correc
Q.53 Read the following statements –

Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): In 2007 a major wave of defaults on home mortgage loans in the United States
threatened the health of not only the original mortgage lenders but of any financial institution
that had made such loans or invested in such loans either directly or indirectly.
Reason (R): A majority of these mortgage defaults were on subprime mortgage loans – high
interest rate loans to home buyers with higher than average credit risk. When the mortgages
started to go bad, many investment funds ―blew up‖ and could not repay the loans they had taken
out from the banks.
Assertion (A)
Assertion (A)
d. Assertion (A) is false but Reason (R) is true
Q.54 Read the following statements from above Paragraph - Assertion (A) 1
and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Pradhan Mantri Jan DhanYojana has encouraged
people to save money in the bank.
Reason (R): RBI has cut Saving Bank Deposit rate from 4% to 3.5%
to encourage savings in the bank.
Alternatives:
a. Both Assertion (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)
Assertion (A) is true but Reason (R) is false
Q.55 Assertion Reason question

Read the following statements - Assertion (A) and Reason (R). Choose one of the correct
Assertion (A) : All commercial banks are Financial Institutions but all financial institutions are
not commercial banks
Reason (R) : Commercial banks only accepts public deposits whereas financial institutions also
lends money to the public.
Alternatives: 1. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion (A).
2. Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of
Assertion (A)
3. Assertion (A) is true but Reason (R) is false.
4. Assertion (A) is false but Reason (R) is true. Ans. Option (2)
Q.56 Assertion -Reason based question
Assertion: In India National Income is rising, but not the per capita income
Reason: In India the rate of population growth is higher than the growth of national income.
1. Both reason and assertion are true and reason is the correct explanation of the assertion
2. Both reason and assertion are true and reason is not the correct explanation of the assertion
3. Assertion is true, but reason is false
4. Reason is true, but assertion is false
Q.57 Assertion-Supply of money refers to Currency held by the public and demand deposits
with commercial Banks
Reason- To issue currency notes minimum reserve system is followed by Reserve Bank of India
(RBI)
Answer- b
Q.58 Read the following statements-Assertion(A) and Reason(R). Choose one of the correct
1. Assertion (A) Money supply does not include money held by government
Reason (R) Money held by government does not come into actual circulation in the
country.
a. Both Assertion (A) and Reason (R) are true and Reason (R) is the true correct
of Assertion (A)
Assertion (A) is false but Reason(R) is correct. Ans (a)
Q. 59 Assertion (A) All financial institutions are bank

Reason (R) Only those financial instittions are banks which accept deposits from the public and
Grant loans to public
Alternatives
a. Both Assertion (A) and Reason (R) are true and Reason (R) is the true correct
of Assertion (A)
d. Assertion (A) is false but Reason(R) is correct.
Ans (d)
Q.60
Assertion(A): RBI monitors functioning of all financial institutions.
Reason (R): All private financial institutions deals with public with motive of economic growth.
Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion(A).
BothAssertion(A)andReason(R)aretrueandReason(R)isnotthecorrectexplanationofAssertion (A).
Assertion (A) is true but Reason (R) is false.
Assertion (A) is false but Reason (R) is true.
Ans1. (c) Assertion (A) is true but Reason (R) is false.

Q.61 Read the following statements - Assertion (A) and Reason (R).
Choose one of the correct alternatives given below: ( 1 mark)
Alternatives:
Assertion (A)
of Assertion
Assertion (A): Money supply includes cash reserves held by the public and demand deposits held
by commercial banks.
Reason(R): Demand deposits held by commercial banks include inter bank deposits which are
not included in money supply. Ans. (d)
Q.62
Assertion(A):Invest more in IT infrastructure for better reach: RBI Governor
Reason (R): Moral suasion is an important qualitative credit control tool.
Alternatives:
Assertion(A).
b. BothAssertion(A)andReason(R)aretrueandReason(R)isnotthecorrectexplanationofAssertion(A)
Assertion(A).
Q.63 Assertion(A):RBI to come out with digital payment security control directions, says RBI
Governor, Shaktikanta Das
Reason (R): RBI supervises the banking system in India
Alternatives:
Assertion(A).
b. BothAssertion(A)andReason(R)aretrueandReason(R)isnotthecorrectexplanationofAssertion(A)
Assertion(A).
Q.64 Assertion(A) . Demand deposits are created by commercial bank and are called bank money.
Reason(R) . Demand deposits are the deposits which can be withdrawn on demand by the depositors
from banks.
(a) Both Assertion(A) and Reason(R )are true and Reason(R)is the correct explanation of the
assertion. (b) Both Assertion(A) and Reason (R)are too but 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. Answer. (b)
Q.65 Read the following statements- Assertion (A) and Reason (R). Choose one of the correct
Assertion (A):- Money supply refers to total volume of money held by public at a particular point of
time in an economy.
Reason (R) :- As money supply is measured at a point of time hence it is a flow concept.
Alternatives:
a. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion
Assertion (A)
Ans: c. Assertion (A) is true but Reason (R) is false.
Q.66 Assertion (A): Demand Deposits include Saving Account Deposits and Current Account
Deposits.
Reason (R): Stock of Gold is not included in money supply.
Assertion (A)
Assertion (A)
d. Assertion (A) is false but Reason (R) is true. Answer: Option B
Q.67 Assertion (A) :Incovertible paper money made legal tender by a government decree is
called fiat money
Reasoning (R) : Notes issued by government are fiat money.
Alternatives: (a) Both assertion (A) and Reasoning (R) are true and Reason (R) is the correct
(b) Both Assertion (A) and Reasoning (R) are true and Reason (R) is not the correct explanation
of Assertion
Answers :
(a) Both assertion (A) and Reasoning (R) are true and Reason (R) is the correct explanation of
Assertion (A)
Q.68 Assertion (A) The Reserve Bank of India acts as a Banker, agent and financial advisor to
the central government.
Reason (R): Central bank is the supreme body as it occupies the top most position in the
monetary and banking system of the country
Alternatives:
Assertion (A)
Assertion (A)
Answer: a.
Q.69 I Assertion: The central bank is the sole authority for the issue of currency in the country.
Reasoning: This is because it leads to uniformity in the issue of currency.
In the light of the above statements say which of the following is correct :
a) BothA& R are correct

b) A is fully correct &R is correct though not sufficient .
c) both are insufficient
d) A is correct & R should have also included efficiency in the financial system & also direct
control in the hands of the central bank.
ANSWER –d
Q.70
2 Read the following statements - Assertion (A) and Reason (R). Choose one
of the correct alternatives given below:
Assertion (A): repo rate and reverse repo rate are used by RBI to lend funds
for long and short time to commercial banks.
Reason (R): Reverse repo rate is exact opposite of Repo rate.
Alternatives:
Ans. d. Assertion (A) is false but Reason (R) is true.
Q.71 Read the following statements - Assertion (A) and Reason (R). Choose one of the correct
Assertion (A): Increase in Repo Rate will lead to decrease in money supply in the economy
Reason (R): Increase in Repo Rate reduces lending because less money is left with commercial
banks for lending.
Alternatives:
Assertion (A).
Assertion (A).
Answer- c. Assertion (A) is true but Reason (R) is false.
Q.72
Read the following statements - Assertion (A) and Reason (R). Choose one of the 1
correct alternatives given below:
Assertion (A): Central bank changes the reserve ratio.
Reason (R): Reserve Bank is the only institution which can issue currency.
Alternatives
Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
Q.73 Assertion / Reason
Assertion (A): Commercial banks are lending more loans to public at cheaper rate.
Reason (R): RBI reduced Cash Reserve Ratios.
Answer: Both A and R are correct. R is the correct explanation of A.
Q.74 ASSERTION (A): Commercial bank has the Currency Authority..

REASONING (R): The Central bank is the Sole issuing authority in the Country. It
has the right of note issuing.
b. Both A and R are true and R is not the correct explanation of A
Ans (d) A is false, but R is True
Q.75 Assertion( A):Commercial banks do not have the note issuing authority, but they
do contribute to money supply in the economy
Reason( R): The Central bank is the sole authority of issuing notes in the country and
commercial bank contribute to money supply through credit creation.
Ans (b)
Q.76 Assertion: Loans offered by commercial banks are equal to deposits received by
them.
Reason: Through the function of money creation, commercial banks are able to offer
loans which are in far excess of deposits received.
Alternatives:
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion(A).
(b) BothAssertion(A)andReason(R)aretrueandReason(R)isnotthecorrectexplanati
onofAssertion (A).
(c) Assertion (A) is true but Reason (R) isfalse.
Assertion (A) is false but Reason (R) istrue. Ans: (d)
Q.77
(A) Effective demand can be increased by more equitable distribution of income.
(R) Thirty or forty entities with income between Rs. 10 lakh and 50 lakhs would create much
more effective demand than a single entity having income of Rs. 50 lakhs.
Answer: (b) Both A and R are true and R is the correct explanation of A

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MONEY AND BANKING REASON AND ASSERTION BASED

Ans : 4 . Assertion (A) is false but Reason (R) is true.

Q.2 Assertion (A):

A : both A and R are true but R is the correct explanation of assertion

A : A and R are true. R is the correct explanation of A

a. Both A and R are true and R is the correct explanation of A

Q.7 Assertion(A): Cheques are fiduciary money

Reason(R): It is issued by the government

Solution: A is true and R is false

Reason (R): Money is a store of value.

Both A and R are true and R is the correct explanation of A.

Q10. Mark the option which is most suitable:

Q.11 Assertion (A) : Bank is a service institution.

Assertion (A): An increase in CRR results in decrease in the value of Multiplier.

Q13. Mark the option which is most suitable:

Choose one of the correct alternatives given below:

Q.20 Assertion: Money Supply is a flow concept.

(a} Both A and R are true and R is the correct explanation of A

a) Both A and R are true and R is the correct explanation of A.

( A ) Money is the commonly accepted medium of exchange.

Q.36 ( A ) Money supply in money in circulation at a given time in an economy.

Reason (R): Money Supply will increase.

(d) Assertion (A) is false but Reason (R) is true

Assertion (A) is true but Reason (R) is false.

Assertion (A) is false but Reason (R) is true.

Q.46 Choose one of the correct alternatives given below:

Reason (R): Demand deposits are called legal tenders.

Ans- Assertion (A) is true but Reason (R) is false

Assertion (A): If LRR is 12.5%, the value of multiplier will be 5.

Reason (R): Credit Multiplier = 1/LRR.

Reason (R): Central bank increases Bank rate in case of inflation.

c. Assertion (A) is true but Reason (R) is false.

d. Assertion (A) is false but Reason (R) is true.

Ans: d. Assertion (A) is false but Reason (R) is true.

Q.52 Assertion: Demand Deposits in the bank are a form of money.

Q.53 Read the following statements –

Assertion (A) is true but Reason (R) is false

Q.55 Assertion Reason question

Q.56 Assertion -Reason based question

Q. 59 Assertion (A) All financial institutions are bank

Ans1. (c) Assertion (A) is true but Reason (R) is false.

a) BothA& R are correct

Q.74 ASSERTION (A): Commercial bank has the Currency Authority..

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c. Assertion (A) is true but Reason (R) is false.  

d. Assertion (A) is false but Reason (R) is true.  