AL YASMIN INTERNATIONAL SCHOOL- RIYADH

Worksheet -Money and Banking

1. In order to control the money supply in the economy, the Central Bank may _______.
(Choose the correct alternative)
(A) buy securities in the open market
(B) sell securities in the open market
(C) reduce cash reserve ratio
(D) reduce repo rate
2. Two components of money supply are ________ and ________. (Fill in the blanks
with correct answers)
3. Loans offered by commercial banks ______ (increase/decrease) the money supply in
the economy. (Fill up the blank with correct alternative.)
4. Supply of money refers to……................. (Choose the correct alternative)
a. currency held by the public
b. currency held by Reserve Bank of India (RBI)
c. currency held by the public and demand deposits with commercial banks
d. currency held in the government account
5.  Which of the following is the thing that is generally accepted by everyone as a
medium of exchange?
a) Money
b) Goods
c) Services
d) None of the above
6. Which function allows the payment to be delayed till future date?
a) Medium of exchange
b) Measure of value
c) Store of value
d) Standard of deferred payments
7. Which of the following is the most liquid form of money supply ?
a) M1
b) M2
c) M3
d) M4
8. High powered money is the money which is produced by
a) RBI
b) Government
c) Commercial banks
d) Both (a) and (b)
9. Match and find the correct pair.
Column A Column B
1. Money supply a. Total stock in circulation
2. Money creation b. Function of Central Bank
3. Money stock c. Function of the commercial bank
4. Money demand d. Money in the bank
 (a) 1- a
(b) 2-b
(c) 3-c
(d) 4-d
10. How much money banks are able to create is determined by:
a) Initial Deposits
b) SLR
c) CRR
d) All of the above
11. ‘‘Central Bank acts as the banker to the government.’’ Elaborate the given statement.
12. Elaborate, how does a Central Bank stabilize money supply through ‘Bank Rate’
13. (a) Define money multiplier.
(b) “Credit creation is inversely related to the reserve deposit ratio‟. Justify the given
statement, using a hypothetical example.
14. Give four agency functions of commercial banks.
15. Give meaning of money supply. State its components.
16. Explain the problem of double coincidence of wants faced under barter system. How
has money solved it?
17. Read the following passage and answer accordingly.
On March 5, 2020, the Reserve Bank of India (RBI) imposed a 30-day moratorium on
YES Bank, superseded the private-sector lender's board, and appointed Prashant
Kumar, who was serving as chief financial officer and deputy managing director at
State Bank of India (SBI), as an administrator.
Under the terms of the moratorium, deposit withdrawals were capped at Rs 50,000 per
person. The central bank proposed a reconstruction scheme under which SBI might
take a maximum of 49% stake in the restructured capital of the bank.
Analysts believed the new management of YES Bank, headed by former Deutsche
Bank India head Ravneet Gill, who joined the bank in early 2019, could turn around
the ship. Gill, however, has struggled to do so.
The banks loan book on March 31, 2014, was
55,633 crore, and its deposits were *74,192 crore. Since then, the loan book has
grown to nearly four times as much, at 2.25 billion as on September 30, 2019.
While deposit growth failed to keep pace and increased at less than three times to 2.10
trillion. The bank's asset quality also worsened and it came under regulator RBI's
scanner.
YES Bank has a substantial exposure to several troubled borrowers, including the
Anil Ambani-led Reliance group, DHFL and IL&FS. The tipping point came when
one of the banks independent directors, Uttam Prakash Agarwal, resigned from the
board in January 2020 citing governance issues.

(i) Which of the following function has been performed by the RBI in the above case
study?
(a) Banker to the Commercial Bank, here YES Bank
(b) Supervision and Regulation of the Commercial Bank, here YES Bank
(c) Controlling credit creation in the economy.
(d) Managerial function
(ii) Under the moratorium, the deposit withdrawal was capped at
(a)10000
(b) * 5,000
(c) 30000
(d) 60,000
(iii) Read the following statements.
Assertion: YES Bank put into the check of the RBI.
Reason: The loan book has grown to nearly four times and deposit failed to grow.
Select the correct alternative from the following:
(a)Both Assertion and Reason are true, and Reason is the correct explanation
of Assertion
(b) Both Assertion and Reason are true, but Reason is not the correct explanation
of Assertion.
(c) Assertion is true, but Reason is false.
(d) Assertion is false, but Reason is true.

(iv) What another role does the RBI play for the Commercial Banks like YES Bank?
(a) Advisor to the Bank
(b) Banker to the Bank
(c) Controls the credit created by the bank
(d) All of the above