Macro CH 5 & 6 PDF

CHAPTER -13-MONEY AND BANKING
MULTIPLE CHOICE QUESTIONS
Q. 1 Central Bank is an open bank of the country that:

(a)Controls the entire banking system of the country
(b)Issues currency
(c)Acts as a banker to the government
(d)All of these
Q.2 CRR in India is fixed by:

(a) The commercial banks
(b) The government
(c) The RBI
(d) The RBI and commercial banks
Q3. In India, the central bank is____________ .

(a)Federal Reserve System
(b) Federal System
(c) Reserve Bank of India
(d) Both (C) and (b)
Q.4 Which of the following system is followed by reserve bank of India for issuing currency?
a) proportionate system
b) simple deposit system
c) minimum deposit system
d) fixed fiduciary issue system
Q.5 For the commercial banks, the sources of profit is

a) credit creation
b) loans
c) spread – the difference between the interest they charge and the interest they pay
1|Page 8 October 2021,ZIET BHUBANESWAR
d) none of these
Q. 6 A commercial bank is that financial institution

a) which accept deposit from the people
b) which offers loans to the people
c) which creates money by way of demand deposit
d) all these functions
Q.7 As an advisor to the government central bank frames policies to regulate the:
(a) Money market
(b) Capital Market
(c) Financial and Capital market
(d) none of these
Q.8 Formula to calculate money multiplier_________

(a) 1/CRR
(b) 1/SLR
(c) 1/CRR*1/SLR
(d) 1/SLR*time deposits
Q.9 Credit cards issued by the banks are___________.

(a) Encourage consumer spending
(b) Increase aggregate demand the economy
(c) Increase in aggregate supply
(d) Both (a) and (b)
Q.10 With an increase in SLR, flow of Credit in the economy.

a) Increase
b) Decrease
c) Remains unchanged
d) None of these

Q.11 Repo rate relates to –
a) Short – term borrowings by the commercial banks
b) Long – term borrowings by the commercial banks
c) Overnight borrowings by the commercial banks
d) None of these
Q.12 CRR refers to –

a) Operative cash reserve
b) Non- operative cash reserve
c) Sterilized cash reserve
d) Both a) and c)
Q.13 Moral suasion by the RBI relates to –

a) Pressure by the RBI to follow its directives
b) Persuasion by the RBI to follow its directives
c) Persuasion as well as pressure by the RBI to follow its directives
d) None of these
Q. 14 Liquid assets include-

a) Unencumbered approved securities
b) Cash
c) Gold
d) All of these
Q.15 - Money functions as a medium of exchange by way of –

a) Transfer of value from one account to the other
b) Cash payments
c) Payments through cheques
d) All of these
Q16. Identify which of the following bank does not interact directly with the general public?

(a) Bank of India
(b) State Bank of India
(c) Central Bank of India
(d) Reserve Bank of India
Q17. MrsMeenaAgrawal, an economics teacher, was explaining the concept of ‘minimum percentage of the
total deposits to be kept by any commercial bank with the Central Bank of the country, as per norms and statute
prevailing in the country’.
From the following, choose the correct alternative which specifies towards the concept explained by her?
(a)Cash Reserve Ratio
(b) Repo Rate
(c) Bank Rate
(d) Statutory Liquidity Ratio
Q18. Identify which of the following is not a function of the Reserve Bank of India?
(a) To act as the banker to the Government of India.
(b) To act as the custodian of the gold reserve of India
(c) To act as the financial advisor to the Government of India
(d) To issue coins and one rupee note
Q19. In a hypothetical economy, Mr. Neeraj has deposited ₹100 in the bank. If it is assumed that there is no
other currency circulation in the economy, then the total money supply in the economy will be _________.
(a) Zero
(b) 100
(c) not defined
(d) 120
Q20. Suppose in an economy, the initial deposits of ₹ 400 crores lead to the creation of total deposits worth ₹
4000 crores. Under the given situation the value of reserve requirements would be________.
(a) 0.01
(b) 1
(c) 0.1
(d) 0.4
Q21. Which measures of money supply of RBI include ‘deposits with post office savings organisations’?
(a) M1 (b) M2 (c) M3 and M4 (d) M2 and M4
Q22. The central bank can increase availability of credit by:

(a) Raising repo rate
(b) Raising reverse repo rate
(c) Buying government securities
(d) Selling government securities
Q23.____________is the most commonly used measure of money supply. It is known as aggregate monetary
resources.
(a) M1 (b) M2 and M3 (c) M3 (d) M3 and M4
Q24. Which of the following functions of Central Bank assures individual account holders that their banks will
be able to pay their money back in case of a crisis and there is no need to panic thus avoiding bank runs?
(a) Banker’s Bank
(b) Banker to the Government
(c) Lender of last resort
(d) Custodian of foreign exchange reserves
Q25. If inflation is to be combated, the RBI:

(a) Raises SLR and lowers CRR
(b) Lowers SLR and raises CRR
(c) Raises both SLR and CRR
(d) Lower both SLR and CRR
Q26. In the present COVID-19 times, many economists have raised their concerns that Indian economy may
have to face a deflationary situation, due to reduced economic activities in the country. Suppose you are a
member of the high powered committee constituted by the Reserve Bank of India (RBI).

You have suggested that as the supervisor of commercial banks,__________ of the money supply be ensured,
by the Reserve Bank of India (RBI).
a) Restriction
b) Release
c) Neither restriction nor release
d) All of these
Q27. Money supply refers to:

(a) Currency held by the public
(b) Currency held by RBI
(c) Currency held by Public and demand deposits with the commercial bank
(d) Currency held in the government account
Q28. Value of Money Multiplier ……………… with an increase in Cash Reserve Ratio.
(a) Increases
(b) Decreases
(c) Remains unchanged
(d) Both (a) and (b)
Q29. Under Statutory Liquidity Ratio, commercial banks are required to keep a fraction of _________ in the
form of liquid assets.
(a) Total deposits
(b) Term deposits
(c) Total demand and term deposits
(d) Current deposits
Q30.If the initial deposit received by a commercial bank is Rs 2000/- and the LRR in the economy is 20%, how
much credit the commercial bank create?
a) 10000 b) 8000 c) 12000 d) 6000
Q31. Which of the following is not included in M1?

a. Cash currency held by public
b. other deposits at RBI
c. National Savings Certificate
d. Demand deposits at bank
Q32.The process of money creation or credit creation is done by:

a. Rural bank
b. Central bank
c. World bank
d. Commercial bank
Q33.Which of the following is a qualitative method?

a. CRR

b. Repo rate
c. Moral suasion
d. Open market operation
Q34.To control inflationary gap RBI should:

a. Issue new currency notes
b. Increase bank rate
c. Decrease in CRR
d. Decrease in SLR
Q35.Who gave the money definition “Money is what money does”?

a. Keynes
b. Adam Smith
c. Walker
d. None of these
Q36.The fraction of deposits kept as cash Reserves by the commercial bank is called:
a. CRR
b. SLR
c. LRR
d. All of these
Q37.Which of the following is not a necessary condition for credit creation by commercial banks?
a. Availability of gold borrowers
b. high rate LRR .
c. people should have a banking habits
d. People should have faith in banking system
Q38.What is the safe limit of issue currency by central bank?

a. 5% of GDP
b. 10% of GDP
c. 5% of NNP
d. 10% of NNP
Q39.Which measurement of money supply has least liquidity?

a. M1
b. M2
c. M3
d. M4
Q40.What will be the money creation if LRR=10% and Primary deposits of commercial banks are Rs.1000 cr.?

a.Rs.500cr
b.Rs.5000cr
c.Rs.4000cr
d.Rs.10000cr
Q41.Who issues one rupee note in India?
a. RBI
b. Commercial bank
c. Finance Minister
d. Central Govt
Q42.Money supply is a --------------- concept.

a. stock
b. flow
c. both a and b
d. none of these
Q43.Which of the following rate is decided by commercial bank?

a. Bank Rate
b. Repo Rate
c. Interest rate
d. All of these
Q44.Raising bank rate by the central bank in India during excess demand is :
a. Deflationary
b. Inflationary
c. Stabilisation
d. All of these
Q45.Which of the following is/are the functions of RBI?

a. Issue of currency notes
b. Bankers to the Govt
c. Bankers to the bank
d. All of these
Q46. Which is the major objective of credit control?

(a) To maintain Price Stability
(b) To stabilize Exchange Rate
(c) For production and Employment
(d) All the above
Q47. Reserve Bank of India was established in :

(a) 1947
(b) 1935
(c) 1937
(d) 1945
Q48. 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
Q49. 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
Q50.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
Q51. Institution that accepts deposits for lending purpose is known as __________
(A) Commercial Bank
(B) Central Bank
(C) Government
(D) Public
Q52. 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
Q53. Indian Monetary System is based on ________

(A) Paper Standard
(B) Metallic Standard
(C) Gold Standard
(D) Credit Money Standard
Q54. 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
Q55. 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
Q56. 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
Q57. Which one is the Bank of the Public?

(A) Commercial Bank
(B) Central Bank
(C) Both (a) and (b)
Q58. If inflation is to be combated, the RBI

(A) raises SLR and lowers CRR
(B) lowers SLR and raises CRR
(C)raises both CRR and SLR
(D) None of these
Q59. 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) None of these
Q60. 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
Q61. The system in which trade can be done by exchange of goods and services is
(A) Barter system (B) Monetary system
(C) Goods system (D) None of the above
Q62.Money contains:
(A) Coins (B) Currency notes
(C) Cheques (D) All of the above
Q63. Money supply is which concept?

(A) Stock (B) Flow
(C) Monetary (D) None of the above
10 | P a g e 8 October 2021,ZIET BHUBANESWAR

Q64.What would be the total money creation in the economy if initial fresh deposits with bank = Rs 50,000 and
LRR=20%
(A) Rs 2,50,000 (B) Rs 10,00,000
(C) Rs 5,00,000 (D) Rs 12,00,000
Q65.M1 of Money supply does not include.

(A) Currency held by public
(B) Other deposit in RBI
(C) Demand deposit with commercial Bank
(D) Net time deposit with commercial bank
Q66.The rate at which commercial bank borrow from central bank is called……………………..
(A) Bank Rate (B) Reverse repo rate
(C) Legal Reserve ratio (D) Cash reserve Ratio
Q67.High powered money is produced by

(A) RBI (B) Government
(C) Commercial banks (D) Both (a) and (b)
Q68.The money in which commodity value = money value is called

(A) Credit money (B) Full bodied money
(C) Representative money (D) All of the above
Q69.Which of the following is not the function of the Central Bank?

(A) Banking facilities to government (B) Lending to commercial banks
(C) Banking facilities to public (D) Lending to government
Q70.The difference between the amount of loan and market value of security offered by borrower against the
loan is called:
(a) Bank rate (b) Cash reserve ratio
(c) Margin requirement (d) Reverse repo rate
Q71.To soak the liquidity from the market, to control inflation

(A) Government securities should be purchased
(B) Government securities should be sold
(C) Repo rate should be decreased
(D) Cash reserve ratio should be decreased
Q72. Who issues Rs. 1 and Rs, 2 denominations currency notes and coins?
A) RBI B) Government
C) Commercial banks D) Ministry of Finance

Q73.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
Q74._____________ is the main source of money supply in an economy.

A) Central Bank B) Commercial Banks
C) Both (a) and (b) D) Government
Q75.India follows which system for issuing currency?

A) Foreign exchange system B) Paper currency system
C) Minimum reserve system D) None of the above
Q76.Which of the following is not included in money supply?

(A) High powered money
(B) Bank money
(C) Time deposits
(D) Inter-bank deposits
Q77.Currency issued by the central bank is called:

(A) Fiat money
(B) Legal tenders
(C) High powered money
(D) All of the above
Q78.Deposit creation by banks comes to an end when ________________.

(A) Fresh deposits with banks become zero
(B) Legal reserve ratio becomes zero
(C) Money multiplier becomes zero
(D) Total reserves equal initial deposits
Q79.The value of credit multiplier will be high when __________

(A) Legal reserve ratio is high
(B) Legal reserve ratio is low
(C) Legal reserve ratio is zero
(D) Legal reserve ratio is infinity

Q80.Calculate the value of money multiplier if Required Reserve Ratio is 12.5%
(A) 12
(B) 8
(C) 4
(D) 15
Q81.Total deposits created by commercial banks is ₹12000 crore and LRR is 25%. Calculate the amount of
initial deposits.
(A) 3000
(B) 4000
(C) 5000
(D) 6000
Q82.Which of the following is the function of the Central Bank?

(A) Accepting deposits from the general public
(B) Giving loans to general public
(C) Bankers’ Bank
(D) Credit Creation
Q83.Credit creation means creation of

(A) Primary deposits
(B) Secondary deposits
(C) Time deposits
(D) None of these
Q84.When RBI acts as a banker to the government, what does it do?

(A) It carries out government transactions.
(B) It advises on monetary and financial matters.
(C) It keeps account of the government
(D) All the above
Q85.Credit control means:

(A) Contraction of credit only
(B) Extension of credit only
(C) Extension and contraction of money supply
(D) None of these
Q86.Money multiplier is denoted by:

(A) LRR
(B) 1/LRR
(C) CRR
(D) 1/CRR
Q87.Which of the following is the component of M1 measure of money supply?

(A) Time deposit
(B) Demand deposits
(C) Treasury bill
(D) None of these
Q88.Which function of money is known as “unit of account”?

(A) Medium of exchange
(B) Measure of value
(C) Standard of deferred payments
(D) Store of value
Q89.Money Supply is a:
(A) Stock concept
(B) Flow concept
(C) Both (A) and (B)
(D) None of these
Q90.In India, suppliers of money are

(A) Government of the country
(B) Banking system of the country
(C) Both (A) and (B)
(D) None of these
ANSWERS
1-D 2-C 3-C 4-C 5-C 6-D 7-A 8-D 9-D 10-B
11-A 12-D 13-C 14-D 15-A 16-D 17-A 18-C 19-B 20-B
21-D 22-C 23-C 24-C 25-C 26-B 27-C 28-B 29-C 30-A
31-C 32-D 33-C 34-B 35-C 36-B 37-B 38-A 39-D 40-D
41-C 42-A 43-C 44-A 45-D 46-B 47-B 48-B 49-A 50-A
51-A 52-D 53-A 54-C 55-B 56-D 57-A 58-C 59-D 60-D
61-A 62-D 63-A 64-A 65-D 66-A 67-D 68-B 69-C 70-C
71-B 72-D 73-C 74-C 75-C 76-D 77-D 78-D 79-B 80-B
81-A 82-C 83-B 84-A 85-C 86-B 87-B 88-B 89-A 90-C
PREPIRED BY : PGT ECONOMICS OF BHUBANESWAR, GUWAHATI, KOLKATA,

RANCHI, SILCHAR AND TINSIKIA REGION.
VETTED BY :RANCHI REGION

CASE STUDY BASED QUESTIONS
Case 1 The power of commercial banks which enables them to expand their deposits through
loans is called credit creation. Legal Reserve Ratio is the minimum reserve that a
commercial bank must maintain in a liquid form as per the instructions of the Central
banks. LRR has two components(i) Cash Reserve Ratio (CRR)-It is the fraction of net
total demand and time deposits that commercial banks must keep as cash reserves with
Central bank. (ii) Statutory liquidity ratio (SLR) – it is the fraction of net total demand
and time deposits that commercial banks must keep themselves in the form of specified
liquid assets.
Assumptions of Credit creation-(i)There is a single banking system in the economy. (ii)
All transactions are outed through the banks
Commercial banks are called the factories of credit. They advance much more than
what they collect from the people in the form of deposits. Through the process of credit
creation, the commercial banks provide finance to all the sectors of economy.
1.Which bank is called the factory of credit creation?
a. Govt. b. Commercial Bank c. LIC d. None of these
2.If CRR=5% and LRR=20% then what is the SLR?
a.5% b.10% c.15% d.None of these
3.Which of the following are the assumptions of credit creation process?
a.There is a single banking system in the economy.
b. All transactions are outed through the banks.
c.Both a and b
d.None of these.
Case 2 The Central Bank of India is an apex body in the banking and financial structure of a
country which was established in 1935.The Central bank enjoys the sole monopoly of
issuing currency. It acts as a banker, agent and advisor to the government. The Central
bank has the same relation with the commercial banks as the later has with the general
public
1.Which is the apex body to regulate financial market in our country?

a.SBI b. RBI c. HDFC d. All of these
2.Which of the following is not the function of RBI?

a. Issue of currency notes. b. Bankers of the govt. c. Deals with general public
d.None of these.

3.When did RBI was set up?
a.1925 b.1930 c.1935 d.none of these
Read the following case study paragraph carefully and answer the questions on the basis of
Case -3
the same. Repo (repurchase) rate also known as the benchmark interest rate is the rate at
which the RBI lends money to the commercial banks for a short-term (a maximum of 90
days). When the repo rate increases, borrowing from RBI becomes more expensive. If RBI
wants to make it more expensive for the banks to borrow money, it increases the repo rate
similarly, if it wants to make it cheaper for banks to borrow money it reduces the repo rate. If
the repo rate is increased, banks can’t carry out their business at a profit whereas the very
opposite happens when the repo rate is cut down. Generally, repo rates are cut down
whenever the country needs to progress in banking and economy. If banks want to borrow
money (for short term, usually overnight) from RBI then banks have to charge this interest
rate. Banks have to pledge government securities as collateral. This kind of deal happens
through a re-purchase agreement. If a bank wants to borrow, it has to provide government
securities at least worth ₹ 1 billion (could be more because of margin requirement which is
5%–10% of loan amount) and agree to repurchase them at ₹1.07 billion (US$15 million) at
the end of borrowing period. So the bank has paid ₹65 million (US$910,000) as interest.
This is the reason it is called repo rate.
1.What kind of tool Repo rate is:-
a) Qualitative tool b) Quantitative tool
c) Fiscal tool c) None of these
2.Why Repo rate is called Repurchasing rate:-
a) Commercial bank has to mortgage its securities with RBI
b) Commercial bank has to make an agreement to repurchase the securities mortgage with
RBI
c) Commercial banks have to pay interest on borrowings
d) None of These
3.If inflationary conditions persist in economy then what should be done with Repo rate:
a) Repo rate should be reduced
b) Repo rate should be increased

c) Does not change Repo rate
d) None of above
4.On which type of borrowing Repo rate is charged by RBI
a) On short term borrowings
b) No long term borrowings
c) Borrowings to maintain reserves
d) Borrowings to purchase assets
Case 4 Read the following case study paragraph carefully and answer the questions based on the
same.
The central bank of India (Reserve Bank of India) is the apex institution that controls the
entire financial market. It’s one of the major functions is to maintain the reserve of foreign
exchange. Also, it intervenes in the foreign exchange market to stabilise the excessive
fluctuations in the foreign exchange rate. In other words, it is the central bank’s job to
control a country’s economy through monetary policy.
If the economy is moving slowly or going backward, there are steps that central bank can
take to boost the economy. These steps, whether they are asset purchases or printing more
money, all involve injecting more cash into the economy. The simple supply and demand
economic projection occur and currency will devalue. When the opposite occurs, and the
economy is growing, the central bank will use various methods to keep that growth steady
and in-line with other economic factors such as wages and prices.
Whatever the central bank does or in fact don’t do, will affect the currency of that country.
Sometimes, it is within the central bank’s interest to purposefully affect the value of a
currency. For example, if the economy is heavily reliant on exports and their currency value
becomes too high, importers of that country’s commodities will seek cheaper supply; hence
directly affecting the economy.
1.Which of the following tools are used by the central bank to control the flow of money in
domestic economy?
a) Fiscal tools
b) Quantitative monetary tools
c) Qualitative monetary tools
d) Both (b) and (c)
2.Money supply is a ------------- concept.
a) Flow
b) Stock

c) Ratio of stock and flow
d) None of above
3.Which of the following steps should take by the central bank if there is excessive rise in
the foreign exchange rate?
a) Supply foreign exchange from its stock
b) Demand more of other foreign exchange
c) Allow commercial banks to work under less strict environment
d) Both (b) and (c)
4.Dear money policy of central bank, which is used to keep the growth steady and in-line
with other economic factors, refers to
a) Tighten the money supply in the economy
b) Ease the money supply in the economy
c) Allow commercial banks to work under less strict environment
d) Both (b) and (c)
Case 5
the same.
The Reserve Bank of India raised inflation forecasts on the back of higher oil and other raw
materials while it maintained the growth forecast at 9.5% for FY22 despite anemic
investment demand. Governor Shaktikanta Das said inflation measured by the consumer
price index (CPI) might remain close to the upper tolerance band of 6% up to September
expecting easing of pressure thereafter on kharif harvest arrivals.
[RBI has fixed inflation rate target in between 2%-6 %.]
The central bank projected CPI at 5.7% for FY22 compared to its earlier projection of 5.1%.
“The supply-side drivers could be transitory while demand-pull pressures remain inert, given
the slack in the economy. A pre-emptive monetary policy response at this stage may kill the
nascent and hesitant recovery that is trying to secure a foothold in extremely difficult
conditions,” Das said.
Crude oil prices are volatile with implications for imported cost pressures on inflation, RBI
said. “The combination of elevated prices of industrial raw materials, high pump prices of

petrol and diesel with their second-round effects, and logistics costs continue to impinge
adversely on cost conditions for manufacturing and services, although weak demand
conditions are tempering the pass-through to output prices and core inflation
1.Who controls monetary policy in India?
(A) Reserve Bank of India
(B) commercial Bank
(C) Cooperative Bank
(D) Government of India
2.How does RBI promote growth process of country: -
(A) By controlling price level in country
(B) By changing various interest rates and money supply
(C) By increasing supply of products
(D) All of above
3.Why does RBI fix the inflation target?
(A) To make growth process fast
(B) To make coordination with government
(C) To manage exchange rate
(D) To stabilize economy
4.Why increasing crude oil prices are matter of concern: -
(A) Increasing crude oil prices are increasing transportation cost
(B) Increasing crude oil prices are making economy potentially unstable
(C) Increasing crude oil prices are volatising growth process
(D) Increasing crude oil prices are adversely affecting demand
Case 6
the same.
The Reserve Bank of India raised inflation forecasts on the back of higher oil and other raw
materials while it maintained the growth forecast at 9.5% for FY22 despite anemic
investment demand. Governor Shaktikanta Das said inflation measured by the consumer
price index (CPI) might remain close to the upper tolerance band of 6% up to September
expecting easing of pressure thereafter on kharif harvest arrivals.
[RBI has fixed inflation rate target in between 2%-6 %.]
The central bank projected CPI at 5.7% for FY22 compared to its earlier projection of 5.1%.
“The supply-side drivers could be transitory while demand-pull pressures remain inert, given
the slack in the economy. A pre-emptive monetary policy response at this stage may kill the
nascent and hesitant recovery that is trying to secure a foothold in extremely difficult
conditions,” Das said.

Crude oil prices are volatile with implications for imported cost pressures on inflation, RBI
said. “The combination of elevated prices of industrial raw materials, high pump prices of
petrol and diesel with their second-round effects, and logistics costs continue to impinge
adversely on cost conditions for manufacturing and services, although weak demand
conditions are tempering the pass-through to output prices and core inflation
1.Who controls monetary policy in India?
(A) Reserve Bank of India
(B) commercial Bank
(C) Cooperative Bank
(D) Government of India
2.How does RBI promote growth process of country: -
(A) By controlling price level in country
(B) By changing various interest rates and money supply
(C) By increasing supply of products
(D) All of above
3.Why does RBI fix the inflation target?
(A) To make growth process fast
(B) To make coordination with government
(C) To manage exchange rate
(D) To stabilize economy
4.Why increasing crude oil prices are matter of concern: -
(A) Increasing crude oil prices are increasing transportation cost
(B) Increasing crude oil prices are making economy potentially unstable
(C) Increasing crude oil prices are volatising growth process
(D) Increasing crude oil prices are adversely affecting demand
1 Read the following article and answer the questions given below
Case-7
The reserve bank of India unexpectedly cut its key deposit rate for the second time in three
weeks, to discourage banks from parking idle funds with it and spur lending instead, to
revive a flagging economy amid the corona virus lockdown.
This week, Prime Minister NarendraModi extended until May 3 a lockdown of population of
1.3 billion as India’s tally of infections exceeded 10000, despite the 3 week shutdown order
from March 24.
The RBI cut its reverse repo rate by 25 basis points (bps) to 3.75 percent with immediate
effect. GovernerShaktikanta Das told a video conference. The rate had already been cut by
90bps on March 27.
“The surplus liquidity in the banking system has risen significantly in the wake of
government spending and the various liquidity enhancing measures undertaken by the
RBI”.He added. “In order to encourage banks to deploy these surplus funds in investments

and loans in productive sectors of the economy, it has been decided to reduce the fixed-rate
reverse repo rate”.
(Source: Business Today, April17 2020)
1.The Reserve Bank of India lowered reverse repo rate to discourage banks from parking idle
funds with ________ (RBI/Commercial Banks).
2.RBI’s measure of reduction in reverse repo rate is done to enable commercial banks
_________ [1]
(a) To use the surplus funds for investment
(b) To grant loans for productive purposes
(c) To widen economic and financial land space
(d) all of these
3.Reverse repo rate is _______(increased/decreased) to correct excess demand .
4.When reverse repo rate is reduced, it__________ [1

(a) Discourages the commercial banks to park their surplus funds with RBI
(b) Encourages the commercial banks to park their surplus funds with RBI
(c) Both (a) and (b)
(d) Neither (a) nor (b)
India’s total Money Supply (M3) stood at Rs 17804885 crore as on October 23rd 2020,
Case-8
recording a rise of 11.60% over the same time last year. Currency with the public stood at Rs
2619612, up 21.2% over the year. Demand deposits with banks were up 10% at Rs 1625734
crore. Time deposits with banks were also up 10% at Rs 13518822 crore. The bank credit to
commercial sector rose 5.2% on year to Rs 10999604 crore.
Money supply in the economy has increased over the months. We can look at money
supply from component side and sources side. One of the ways of measuring money supply
is M3, which is sum of the currency with the public, the demand deposits with the banking
system, which included current deposits and saving deposits, the time deposits with the
banking system, such as fixed deposits and recurring deposits, and other deposits of RBI.
The currency with the public has grown by more than 21% since June and so have bank
deposits. This led to M3 growing by over 12% since June.
Heightened uncertainty in India caused by the corona virus pandemic has led to a surge in
currency in circulation as people hoard cash or park money in accessible deposits to

safeguard themselves against salary cut or job losses.
Foreign money continuously keeps coming to India, Leading to an increase in demand for
the rupee against the dollar. To prevent rupee from appreciating, RBI sold rupees and bought
dollars adding to the increase in M3.
1.Money supply in the economy has increased over 5 months since June due to:
(a) Public holding cash for transaction and precautionary motive.
(b) Inflow of foreign exchange.
(c) Uncertainty caused by corona virus pandemic
(d) all of these
2.Sum of currency with public, demand deposits and time deposits with the bank is
_________ (M2/M3) Measure of money supply.
3.______ and ________ are the components of money supply.
4.Money supply refers to the total _______(stock/flow) of money in circulation in the

economy which can be directly used for transactions.
Some countries have made an attempt to move towards an economy which use less of
Case-9
cash and more of digital transactions. A cashless society describes an economic state
whereby
financial transactions are not connected with money in the form of physical bank notes or
coins
but rather through the transfer of digital information (usually an electronic representation of
money) between the transacting parties. In India government has been consistently investing
in
various reforms for greater financial inclusion. During the last few years’ initiatives such as
Jan
Dhan accounts, Aadhar enabled payment systems, e –Wallets, National financial Switch
(NFS)
and others have strengthened the government resolve to go cashless. Today, financial
inclusion
is seen as a realistic dream because of mobile and smart phone penetration across the
country.
1.What is the correct sentence in the following option?
(A) India attempt to move towards an economy which use less of cash with Broad aspects.
(B) India attempt to move towards an economy which use less of cash with Narrow aspects.
(C) India not attempt to move towards an economy which use less of cash.
2.What is the meaning of cashless society?
(A) Financial transactions are not connected with money in the form of physical bank notes
orcoins
(B) an electronic representation of money

(C) (A) and (B) Both
3.Which of the following is Money proper?
(A) Bonds (B) Time Deposits
(C) Government Securities (D) Currency Notes and Demand Deposits
4.Which is forms of digital money in the following option?
(A) Jan Dhan accounts (B) Aadhar enabled payment systems
(C) E –Wallets (D) All of the above
5.In India government has been consistently investing in various reforms for greater ----------
-
-----------. Fill in the Blank from following option.
(A) Financial inclusion (B) Financial transactions
(C) (A) and (B) Both (D) None of the above
Central bank has several important functions. It issues the currency of the country. It controls
Case-10
money supply of the country through various methods, like bank rate, opens market
operations and variations in reserve ratios. It acts as a banker to the government. It is the
custodian of the foreign exchange reserves of the economy. It also acts as a bank to the
bankingsystem, which is discussed in detail later.
1.What is the name of Indian central bank?
(A) Reserve Bank of India (B) Federal Reserve
(C) State Bank of India (D) None of the above
2.Who determine the Case Reserve Ratio?
(A) Central Bank (B) Federal Reserve
(C) Commercial Bank (D) Government
3.Who is the official ‘Lender of the Last Resort’ in India?
(A) PNB (B) RBI (C) SBI (D) CBI
4.In order to discourage credit in the economy, the central bank may
(A) Increase Bank rate (B) Decrease Bank rate
(C) Buy securities in the open market (D) Decrease CRR
5.RBI issue all currency in India except:
(A) One-rupee note (B) Two-rupee note
(C) Five-rupee note (D) Ten-rupee note 9
The following hypothetical Case Study, carefully and answer the question numbers 1-4
Case-11
on the basis of the same.
Demonetisation was a new initiative taken by the Government of India to tackle the
problem of corruption, black money, terrorism and circulation of fake currency in the
economy. Old currency notes of Rs 500, and Rs 1000 were no longer legal tender. New
currency notes in the denomination of Rs 500 and Rs 2000 were launched. The public were
advised to deposit old currency notes in their bank account till 31 December 2016 without
any declaration and upto 31March 2017 with the RBI with declaration.
Further to avoid a complete breakdown and cash crunch, notes government had
allowed exchange of Rs 4000 old currency the by new currency per person and per day.
Further till 12 December 2016, old currency notes were acceptable as legal tender at petrol

pumps, government hospitals and for payment of government dues, like taxes, power bills,
etc.
This move received both appreciation and criticism. There were long queues outside
banks and ATM booths. The shortage of currency in circulation had an adverse impact on
the economic activities. However, things improved with time and normalcy returned.
This move has had positive impact also. It improved tax compliance as a large
number of people were bought in the tax ambit. The savings of an individual were
channelised into the formal financial system. As a result, banks have more resources at their
disposal which can be used to provide more loans at lower interest rates. It is a
demonstration of State’s decision to put a curb on black money, showing that tax evasion
will no longer be tolerated.
1.The latest demonetization of Indian currencies introduced by the Government was:

(a) November 2016 (b) December 2016 (c) October 2016 (d)
September 2016
2.Who was the Prime Minister of India during the demonetization of 2016?
(a) Manmohan Singh (b) Atal Bihari Bajpayee (c) Narendra Modi (d) HD
Devegowda
3.Which one of the following was one of the objectives of demonetization in 2016?
(a) To gift new notes to people of India (b) To reduce and prevent circulation of black
money in the market
(c) To increase the interest rate (d) To increase the value of the currency
4.Which is not a positive impact of the demonetization drive in 2016?

(a) Improved tax compliance (b) channelization of more savings into the formal
financial system
(c) Commercial Banks lower the rate of interest (d) long queues outside banks and ATM
booths
Case-12 Read the following news report and answer Questions (3) and (4) on the basis of the
same:
The Reserve Bank of India (RBI) cut Repo Rate to 4.4%, the lowest in at least 15 years.
Also, it reduced the Cash Reserve Ratio (CRR) maintained by the banks for the first time in
over seven years. CRR for all banks was cut by 100 basis points to release ₹ 1.37 lakh crores
across the banking system. RBI governor Dr. Shaktikanta Das predicted a big global
recession and said India will not be immune. It all depends how India responds to the
situation. Aggregate demand may weaken and ease core inflation. (The Economic Times;
March 27th, 2020)

1.Cut in Repo rate by RBI is likely to……….. the demand for goods and services in the
economy.
(a) Increase (b) Decrease (c) remain stable (d) None of these
2.Decrease in Cash Reserve Ratio will lead to…...........…
(a) Fall in AD (b) Rise in AD (c) No change in AD (d) Fall in general price level
ANSWERS
Case 1
Q.NO.1 b
Q.NO.2 c
Q.NO.3 c
Case 2
Q.NO.1 b
Q.NO.2 c
Q.NO.3 B
Case 3
Q.NO.1 (a)
Q.NO.2 (b)
Q.NO.3 (b)
Q.NO.4 (a)
Case 4
Q.NO.1 (d)
Q.NO.2 (b)
Q.NO.3 (a)
Q.NO.4 (a)

Case 5
Q.NO.1 (A) Credit creation process will increase
Q.NO.2 (B) C + DD + OD + time deposits
Q.NO.3 (D) All of above
Q.NO.4 Central Bank of the country

Case-6
Q.NO.1 (A) Reserve Bank of India
Q.NO.2 (B) By changing various interest rates and money supply
Q.NO.3 (D) To stabilize economy
Q.NO.4 (B) Increasing crude oil prices are making economy potentially unstable
Case-7
Q.NO.1 RBI
Q.NO.2 (d) all of these
Q.NO.3 increased
Q.NO.4 (a) discourages the commercial banks to park their surplus funds with RBI
Case-8
Q.NO.1 (d) all of these
Q.NO.2 M3
Q.NO.3 Currency held by public; net demand deposits held by the commercial bank
Q.NO.4 Stock
Case-9
Q.NO.1 1- B
Q.NO.2 2-C
Q.NO.3 3-D
Q.NO.4 3-D
5-A
Q.NO.5
Case-10
Q.NO.1 A

Q.NO.2 A
Q.NO.3 B
Q.NO.4 A
A
Q.NO.5
Case-11
Q.NO.1 (a)
Q.NO.2 (c)
Q.NO.3 (b)
Q.NO.4 (d)
Case-12
Q.NO.1 (a)
Q.NO.2 (a)
PREPIRED BY : PGT ECONOMICS OF BHUBANESWAR, GUWAHATI,

KOLKATA, RANCHI, SILCHAR AND TINSIKIA REGION.

TRUE AND FALSE QUESTIONS
1. M1= C +DD +Time Deposit.

A.True
B.False
2. M1 has most liquidity.
A.True
B.False
3. There will be expansion of credit if SLR decreases.
A.True
B.False
4. Commercial bank issue coins.
A.True
B.False
5. All financial institutions are not banking institution.
A.True
B.False
6. All financial institution are treated as banking institutions.
A.True
B.False
7 Fiat money is the same as Fiduciary money.
A.True
B.False
8 Money as medium of exchange solves the barter’s problem of ‘lack of double coincidence of
want’.
A.True
B.False
9 Legal tender money has a legal sanction behind it by the government.
A.True
B.False
10 Currency created by RBI is called-High-powered Money.
A.True
B.False
11 Currency notes and coins are called legal tenders.

A.True
B.False
12 Currency created by the central bank is called bank money.
A.True
B.False
13 Higher the legal reserve ratio, greater would be the money creation in the economy.
A.True
B.False
14 Market rate of interest tends to be positively related to the bank rate.
A.True
B.False
15 Stock of money with the money issuing authorities is an important component of money
supply.
A.True
B.False
16 Under barter system of exchange, goods are exchanged for goods.
A.True
B.False
17 Money can be withdrawn as and when needed by the depositors in case of term deposits.
A.True
B.False
18 Both primary and secondary deposits are demand deposits.

A.True
B.False
19 open market operations are meant to increase or decrease the supply of money in the
economy.
A.True
B.False
20 If reserve repo rate is 4 percentage. Then repo rate will be lower than this.
A.True
B.False
21 Money as a medium of exchange solves the problem of lack of double coincidence of want.
A.True
B.False
22 M1 includes saving deposits of post office savinds with banks.

A.True
B.False
23 Commerical banks do not create money.
A.True
B.False

24 There is inverse relation between LRR and the size of the money multiplier.
A.True
B.False
25 Bank rate is a qualitative method of credit control.
A.True
B.False
26 The Central Bank is a banker to the government.
A.True
B.False
27 In respect of the Barter System there is difficulty of control credit creation by banks
A.True
B.False
28 Between M3 and M4, M3 is the most commonly used measure of money supply and known
as aggregate monetary resources.
A.True
B.False
29 In the C-C economy, saving is possible only by way of storage of goods
A.True
B.False
30 Credit multiplier reflects the maximum amount of credit that the commercial banks can
legally create on the basis of CRR.
A.True
B.False
ANSWER
1. False
2. True
3. True
4. False
5. True
6 FALSE
7 FALSE
8 TRUE
9 TRUE
10 TRUE
11 True: RBI is responsible for giving the bearer of the currency equal purchasing
power.
12 False: the currency created by the Central bank is called High Powered Money
13 False: Value of money multiplier is inversely related to LRR.

14 True: Increase or decrease in bank rate is often followed by increase or decrease in
the market rate of interest.
15 False: Supply of money does not include the stock of it with the money issuing
authorities.
16 True
17 False
18 True
19 True
20 False
21 True
22 False
23 False
24 True
25 False
26 True
27 False
28 True
29 True
30 True

KOLKATA, RANCHI, SILCHAR AND TINSIKIA REGION.

ASSERTION- REASON QUESTIONS
Read the following statements Assertion (A) and Reason (R). Choose the correct alternatives
given below:
1. 1. Assertion (A): To boost the falling demand in the economy. Reserve bank of India
recently reduced repo rate and bank rate.
Reason (R): Decrease in repo rate and bank rate causes decreases in the rate of interest
which leads to rise demand of credit because of which more money flows into the
economy, purchasing power of people increases. Thus, aggregate demand rises and
deficient demand is corrected.
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 the not 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
2. Assertion (A): Anything will be called money if the law of country proclaims it to be
money. It will be commonly accepted measure of value as it will be endowed with legal
tender power (Limited and unlimited).Thus “money is what the law says it is”
Reason (R): Limited legal tender money can be accepted up to a certain limit. For
example, in India, coins up to Rs1000 only (as per coinage bill, August 2011) can be
accepted legally in payment. All currency notes have unlimited legal tender.
Alternatives:
of Assertion (A).
3. Assertion (A): Money supply is a flow concept.

Reason (R): Money Supply always measured at a particular point of time.
Alternatives:
of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.

4. Assertion (A): The reserve bank of India had in March 2020 offered a three months
moratorium on loans enabling borrowers to defer repayment on EMI and other loans.
Reason (R): The loan moratorium was aimed at providing borrowers relief aimed the
economic impact of the covid-19 pandemic.
Alternatives:
of Assertion (A).
5. Assertion (A): Currency held by public is a monetary liability of central bank.

Reason (R): Central bank controls credit, whereas commercial banks create credit with
currency held by public.
Alternatives:
of Assertion (A).
6. Assertion – Demonetization was the step taken by the Government of India in order to
tackle the problems of corruption, black money, terrorism and circulation of fake currency
in the Indian Economy.
Reason– Demonetization has ensured improved tax compliance in India over the period of
time.
Alternatives:
of Assertion (A).
7. Assertion – Supply of money consists of currency held by the people and net demand
deposits held by the Commercial Banks
Reason – Supply of money is the quantity of money over a period of time.
Alternatives:
of Assertion (A).

8. Assertion – Credit multiplier is inversely related to CRR and is the reciprocal of CRR.
Reason – In times of inflation, RBI raises the CRR to control money supply in the
economy.
Alternatives:
of Assertion (A).
9. Assertion – M2 and M4 include saving deposits of post office savings organisations in

India.
Reason - M1 is most liquid and easiest for transactions whereas M4 is least liquid of all.
Alternatives:
of Assertion (A).
10. Assertion – The monetary policy rests with RBI in India which controls credit and money
supply in the economy.
Reason – To combat excess demand in the economy, RBI increases the margin
requirement, one of the important qualitative measures of the monetary policy.
Alternatives:
of Assertion (A).
11. Assertion (A): Economic exchanges without the mediation of money are referred to
as barter exchanges.
Reason (R): Demand Deposits are the part of M1.
(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
(d) Assertion (A) is false but Reason (R) is true.
12. Assertion (A): Total quantity or stock of money available in the economy at
particular point of time is known as money supply.
Reason (R): Demand deposit is not the part of money supply.
explanation of Assertion(R)
(c) Assertion (A) is true but Reason (R) isfalse.
(d) Assertion (A) is false but Reason (R) istrue.

13. Assertion (A): M1 is Most liquid of money supply.
Reason (R): M1 = C + DD + OD
(b) Both Assertion (A) and Reason (ii) are true and Reason (R) is the correct
14. Assertion (A) The lender of last resort is one of the important function of RBI Reason
(R) RBI uses the lender of last resort function to save commercial bank during
emergency.
15. Assertion (A): All the commercial bank is a financial institution’ Reason (R): All
financial institutions are banks.
16. Assertion (A): Money Multiplier = 1/LRR
Reason (R): Lower the LRR higher the value of Money Multiplier and vice-versa.
of
Assertion (A)
explanation of
Assertion (A)
17. Assertion (A): The RBI controls the money supply in the economy in various ways.
Reason (R): The tools used by the Central bank to control money supply can be
quantitative or qualitative
of Assertion (A)

18. Assertion (A): currency issued by the central bank can be held by the public Known as
Monetary base.
Reason (R): It consists coins and paper currency.
(a) Both Assertion (A) and Reason (RR) are true and Reason (R) is the correct explanation
of Assertion (A)
19. Assertion (A): Commercial Bank acts as a banker to the Government
Reason (R): Reserve Bank is the only institution which can issue currency
of Assertion (A)
20. Assertion (A): Money creation is the main function of Commercial banks.
Reason (R): How many times the total deposit would be of the initial deposit is known as
Money Multiplier.
of Assertion (A)
explanation of Assertion.
(c)Assertion (A) is true but Reason (R) is false.
21. Assertion(A): Commercial Bank contribute to Quantum of money supply in the economy
through credit creation
Reason(R): As they have the note issuing authority.
Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
(a) Assertion and Reason both are correct, statements and Reason is correct explanation
for Assertion.
(b) Assertion and Reason both are correct statements but Reason is not correct explanation
for Assertion.
(c) Assertion is true but Reason is false.
(d) Assertion is false but Reason is true.
22. Assertion (A): LRR represents the minimum reserve ratio essential to be maintained by
banks.
Reason: (R) Bank create deposits in the process of making loans to their customers.
for Assertion.
for Assertion.

23. Assertion (A)- when CRR is increased, credit creation capacity of commercial banks
reduces.
Reason (R)- with increase in reserve ratios, banks have less funds available for loans.
for Assertion.
for Assertion.
24. Assertion (A)-Open market operations are used to influence money supply in the
economy.
Reason: (R) Central bank sells government securities to increase the flow of credit in the
economy.
for Assertion.
for Assertion.
25. Assertion: The Central Bank is also known as the bank of issue.
Reason: The Central Bank enjoys the sole monopoly of issuing currency to ensure control
over volume of currency and money supply.
for Assertion.
for Assertion.
26. Assertion (A)- RBI gives licence to commercial banks and supervise them.
Reason (R)- RBI is the largest bank of country.
(a) both (A) & (R) are true and (R) is correct explanation of (A)
(b) both (A) & (R) both are true and (R) is not correct explanation of (A)
(c) (A) is true but (R) is false
(d) (A) is false but (R) is true
27. Assertion (A)-Money supply is a flow concept.
Reason (R)- Money supply refers to total currency circulation at a point of time.
(a) both (A) & (R) both are true and (R) is correct explanation of (A)

28. Assertion (A)-Governor of RBI gives advises to central government regarding about tax,
expenditure related decisions.
Reason (R)- It is essential for the government to follow the advises of RBI.
(a) both (A) & (R) both are true and (R) is correct explanation of (A)
29. Assertion (A)- Credit creation process increases the money supply in economy.
Reason (R)- Through the credit creation process commercial banks can distribute loans
many times as compare to their primary deposits.
(a) Both (A) & (R) both are true and (R) is correct explanation of (A)
(b) Both (A) & (R) both are true and (R) is not correct explanation of (A)
30. Assertion (A)-Settlement of liabilities of commercial banks is done by RBI.

Reason (R)- RBI holds the accounts of all commercial banks and commercial banks keep
funds in it essentially
(a) Both (A) & (R) both are true and (R) is correct explanation of (A)
(b) Both (A) & (R) both are true and (R) is not correct explanation of (A)
KEY/ANSWER SHEET
1 2 3 4 5 6 7 8 9 10 11
A A C A D B D A A A B
12 13 14 15 16 17 18 19 20 21 22
C A A C A A A D B C B
23 24 25 26 27 28 29 30
A C A C D C A B

KOLKATA, RANCHI, SILCHAR AND TINSIKIA REGION .

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CHAPTER -13-MONEY AND BANKING

MULTIPLE CHOICE QUESTIONS

Q. 1 Central Bank is an open bank of the country that:

Q.2 CRR in India is fixed by:

Q3. In India, the central bank is____________ .

Q.5 For the commercial banks, the sources of profit is

Q. 6 A commercial bank is that financial institution

Q.8 Formula to calculate money multiplier_________

Q.9 Credit cards issued by the banks are___________.

Q.10 With an increase in SLR, flow of Credit in the economy.

2|Page 8 October 2021,ZIET BHUBANESWAR

Q.12 CRR refers to –

Q.13 Moral suasion by the RBI relates to –

Q. 14 Liquid assets include-

Q.15 - Money functions as a medium of exchange by way of –

3|Page 8 October 2021,ZIET BHUBANESWAR

Q22. The central bank can increase availability of credit by:

Q25. If inflation is to be combated, the RBI:

5|Page 8 October 2021,ZIET BHUBANESWAR

Q27. Money supply refers to:

Q31. Which of the following is not included in M1?

Q32.The process of money creation or credit creation is done by:

Q33.Which of the following is a qualitative method?

6|Page 8 October 2021,ZIET BHUBANESWAR

Q34.To control inflationary gap RBI should:

Q35.Who gave the money definition “Money is what money does”?

Q38.What is the safe limit of issue currency by central bank?

Q39.Which measurement of money supply has least liquidity?

7|Page 8 October 2021,ZIET BHUBANESWAR

Q42.Money supply is a --------------- concept.

Q43.Which of the following rate is decided by commercial bank?

Q45.Which of the following is/are the functions of RBI?

Q46. Which is the major objective of credit control?

Q47. Reserve Bank of India was established in :

Q48. Which of the following is a qualitative method of credit control?

Q49. Who is the custodian of the Indian Banking system?

Q53. Indian Monetary System is based on ________

Q55. Which is the correct order of money evolution?

Q56. By supply of money we mean :

Q57. Which one is the Bank of the Public?

Q58. If inflation is to be combated, the RBI

Q59. What is true for the Central Bank?

Q60. Which one is true?

Q63. Money supply is which concept?

10 | P a g e 8 October 2021,ZIET BHUBANESWAR

Q65.M1 of Money supply does not include.

Q67.High powered money is produced by

Q68.The money in which commodity value = money value is called

Q69.Which of the following is not the function of the Central Bank?

Q71.To soak the liquidity from the market, to control inflation

11 | P a g e 8 October 2021,ZIET BHUBANESWAR

Q74._____________ is the main source of money supply in an economy.

Q75.India follows which system for issuing currency?

Q76.Which of the following is not included in money supply?

Q77.Currency issued by the central bank is called:

Q78.Deposit creation by banks comes to an end when ________________.

Q79.The value of credit multiplier will be high when __________

12 | P a g e 8 October 2021,ZIET BHUBANESWAR

Q82.Which of the following is the function of the Central Bank?

Q83.Credit creation means creation of

Q84.When RBI acts as a banker to the government, what does it do?

Q85.Credit control means:

Q86.Money multiplier is denoted by: