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DELHI PUBLIC SCHOOL SANGRUR

SUBJECT: Economics
Chapter: Money and banking
Revision Worksheet
CLASS XII

Multiple Choice Questions

1. What is the defect of the barter system?
(A) Lack of double coincidence of wants (B) Difficulty in the measurement of value
(C) Difficulty in store of value (D) All of these
Answer: (D) All of these
2. Which of the following is the credit money?
(A) Cheque and draft (B) Promissory note (C) Exchange note (D) All of these
Answer: (D) All of these
3. Which among the following is the near money?
(A) Bonds (B) Insurance policy (C) Securities (D) All of these
Answer: (D) All of these
4. Which of the following is the feature of money?
(A) General acceptability (B) Homogeneous unit (C) Liquid asset (D) All of these
Answer: (D) All of these
5. In order to encourage investment in the economy, the Central Bank may ________
(A) Reduce Cash Reserve Ratio (B) Increase Cash Reserve Ratio
(C) Sell Government securities in the open market (D) Increase Bank Rate
Answer: (A) Reduce Cash Reserve Ratio
6. Institution that accepts deposits for lending purpose is known as __________
(A) Commercial Bank (B) Central Bank (C) Government (D) Public
Answer: (A) Commercial Bank
7. Which of the following is the function of a commercial bank?
(A) Accepting deposits (B) Credit creation (C) Agency function (D) All of these
Answer: (D) All of these
8. The central bank can increase the availability of credit by:
(A) Raising repo rate (B) Raising reverse repo rate
(C) Buying government securities (D) Selling government securities
Answer: (D) Selling government securities
9. Giving permission to withdraw money by an amount more than deposited to is known as _________
(A) Advance (B) Overdraft (C) Loan (D) None of these
Answer: (B) Overdraft

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10. What are the alternative measures of money supply in India?

(A) M1 (B) M2 (C) M3 and M4 (D) All of these
Answer: (D) All of these
11. Who circulates all mint and one rupee not in India?
(A) Ministry of Finance (B) RBI (C) Ministry of External Affairs (D) State Government
Answer: (A) Ministry of Finance
12. Which of the following is the narrow measure of the money supply?
(A) M2 (B) M3 (C) M1 (D) M4
Answer: (C) M1
13. When was the minimum reserve system started in India?
(A) 1947 (B) 1948 (C) 1951 (D) 1957
Answer: (D) 1957
14. Which is the most liquid measure of the money supply?
(A) M4 (B) M3 (C) M2 (D) M1
Answer: (D) M1
15. High Powered Money includes:
(A) C + DD + OD (B) C + R + OD (C) C + R + TD (D) C + DD + TD
Answer: (B) C + R + OD
16. Indian Monetary System is based on ________
(A) Paper Standard (B) Metallic Standard (C) Gold Standard (D) Credit Money Standard
Answer: (A) Paper Standard
17. Which of the following is the apex bank of India?
(A) RBI (B) SBI (C) SBP (D) PNB
Answer: (A) RBI
18. Who has the right of note issue?
(A) Central Bank (B) Commercial Bank (C) Government (D) Co-operative Bank
Answer: (A) Central Bank
19. Which of the following is the function of a Central bank?
(A) Issue of notes (B) Banker to the Government and Banks
(C) Supply and control of money (D) All of these
Answer: (D) All of these
20. 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
Answer: (C) Cash reserve ratio
21. Demand deposits include
(A) Saving account deposits and fixed deposits (B) Saving account deposits and current account deposits
(C) Current account deposits and fixed deposits (D) All type of deposits
Answer: (B) Saving account deposits and current account deposits
22. What are the necessary conditions of the Barter System?

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(a) Limited Needs (b) Limited Exchange Area

(c) Economically Backward Society (d) All the above
Answer: (d) All the above
23. What are the advantages of the Barter System?
(a) Simple System (b) More Mutual Co-operation
(c) No Economic Disparities (d) All the above
Answer: (d) All the above
24. Which one is the difficulty of the Barter System?
(a) Lack of Double Coincidence (b) Difficulty of Division of the Goods
(c) Lack of General Acceptable Measure of Value (d) All the above
Answer: (d) All the above
25. 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
Answer: (b) Commodity Money, Metal Money, Paper Money, Credit Money
26. “Money is what money does.” Who said it?
(a) Hartley Withers (b) Haw trey (c) Thomas (d) Keynes
Answer: (a) Hartley Withers
27. Which one is included in the primary function of money?
(a) Medium of Exchange (b) Measure of Value (c) Both (a) and (b) (d) Store of Value
Answer: (c) Both (a) and (b)
28. Which one is included in the secondary function of money?
(a) To make Deferred Payments (b) Store of Value (c) Transfer of Value (d) All of these
Answer: (d) All of these
29. “Money is a pivot around which the whole economy clusters.” Who said it?
(a) Keynes (b) Robertson (c) Marshall (d) Haw trey
Answer: (c) Marshall
30.The function of money is:
(a) Medium of Exchange (b) Measure of Value (c) Store of Value (d) All the above
Answer: (d) All the above
31. The functions of money include:
(a) Value determination (b) Store of value (c) Means of exchange (d) All of these
Answer: (d) All of these
32. Money is a matter which is:
(a) A measure of value (b) Accepted as a means of exchange
(c) Used to store wealth (d) All of these
Answer: (d) All of these

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33. 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
Answer: (d) All of these
34. Which of the following is not a function of money?
(a) Medium of exchange (b) Price stability (c) Store of value (d) Unit of account
Answer: (b) Price stability
35. Which one is the Bank of the Public?
(a) Commercial Bank (b) Central Bank (c) Both (a) and (b) (d) None of the above
Answer: (a) Commercial Bank
36. The primary function of Commercial Bank is?
(a) Accepting Deposits (b) Advancing Loans (c) Credit Creation (d) All of these
Answer: (d) All of these
37. Deposits accepted by the Commercial Banks:
(a) Current Deposits (b) Saving Deposits (c) Time Deposits (d) All of these
Answer: (d) All of these
38. What type of loan is advanced by Commercial Banks?
(a) Cash Credit (b) Overdraft (c) Loan and Advance (d) All of these
Answer: (d) All of these
39. Which function is the Secondary Function of Commercial Banks?
(a) Agency Function (b) General Utility Function (c) Social Function (d) All of these
Answer: (d) All of these
40. Which is the Agency Function of Commercial Banks?
(a) Advancing Loans (b) Accepting Deposits (c) Act as Trustee (d) Locker Facility
Answer: (c) Act as Trustee
41. Credit Multiplier is:
(a) 1CRR (b) cash×1 CRR (c) Cash x CRR (d) None of these
Answer: (a) 1CRR
42. Credit money is increased when CRR:
(a) Falls (b) Rises (c) Both (a) and (b) (d) None of these
Answer: (a) Falls
43. The full form of ATM is:
(a) Any Time Money (b) All Time Money (c) Automated Teller Machine (d) Both (a) and (b)
Answer: (c) Automated Teller Machine
44. The main function of a commercial bank is:
(a) Credit control (b) Loaning to other banks
(c) Accept deposits from customers (d) All the above
Answer: (c) Accept deposits from customers
45. What is the Central Bank of India?

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(a) Commercial Bank (b) Central Bank (c) Private Bank (d) None of these
Answer: (a) Commercial Bank
46. Commercial banks:
(a) Issue currency notes (b) Accepts deposits from customers
(c) Provide loans to customers (d) Only (b) and (c)
Answer: (d) Only (b) and (c)
47. 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) All the above
Answer: (d) All the above
48. Central Bank of India is:
(a) Reserve Bank of India (b) State Bank of India (c) Central Bank of India (d) Bank of India
Answer: (a) Reserve Bank of India
49. Which of the following is the function of the Central Bank?
(a) Monopoly of Note Issue (b) Banker of the Government
(c) Custodian of Foreign Exchange Reserves (d) All the above
Answer: (d) All the above
50. Which type of currency is issued by Central Bank?
(a) Currency (b) Credit Money (c) Coins (d) All of these
Answer: (a) Currency
51. Which is the major objective of credit control?
(a) To maintain Price Stability (b) To stabilize Exchange Rate
(c) To production and Employment (d) All the above
Answer: (b) To stabilize Exchange Rate
52. 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
Answer: (d) All the above
53. Which is not a quantitative method of credit control?
(a) Bank Rate (b) Moral Suasion (c) Open Market Operations (d) Change in CRR
Answer: (b) Moral Suasion
54. Every bank is required to maintain a fixed percentage of its assets in the form of cash is called:
(a) Cash Reserve Ratio (b) Statutory Liquidity Ratio (c) Both (a) and (b) (d) None of the above
Answer: (b) Statutory Liquidity Ratio
55. Reserve Bank of India was established in:
(a) 1947 (b) 1935 (c) 1937 (d) 1945
Answer: (b) 1935

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56. Monetary policy is related with:

(a) Public Expenditure (b) Taxes (c) Public Debt (d) Open market operations
Answer: (d) Open market operations
57. Which of the following issue paper currency in the country?
(a) Commercial Bank (b) Central Bank (c) World Bank (d) Industrial Bank
Answer: (b) Central Bank
58. The central bank controls credit through:
(a) Bank rate (b) Open market (c) CRR (d) All the above
Answer: (a) Bank rate
59. 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
Answer: (b) Restriction on consumer credit
60. The major objectives of monetary policy is/are:
(a) Increase in output and employment (b) Stability in the foreign exchange rate
(c) Price stability (d) All of these
Answer: (d) All of these
61. Who regulates the money supply?
(a) Govt. of India (b) Reserve Bank of India (c) Commercial Bank (d) Planning Commission
Answer: (b) Reserve Bank of India
62. With which Narsimham Committee is related to?
(a) Tax Reforms (b) Banking Reforms (c) Agriculture Reforms (d) Infrastructure Reforms
Answer: (b) Banking Reforms
63. In which year the second Narsimham Committee was constituted?
(a) 1978 (b) 1991 (c) 1997 (d) 1998
Answer: (d) 1998
64. Banking Ombudsman Scheme was announced in the year:
(a) 1990 (b) 1995 (c) 1997 (d) 2000
Answer: (b) 1995
65. Which was included in the purview of the Banking Ombudsman Scheme?
(a) All Scheduled Banks (b) Co-operative Banks (c) Commercial Banks (d) All of these
Answer: (d) All of these
66. Which committee was constituted for suggesting consumer service improvements in banks?
(a) Raja Chelliah Committee (b) Goiporia Committee
(c) Verma Committee (d) Chakrabarty Committee
Answer: (b) Goiporia Committee
67. For revival and restructuring of weak banks of the public sector, which committee was constituted?
(a) Verma Committee (b) Goiporia Committee
(c) Rekhi Committee (d) Narsimham Committee

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Answer: (a) Verma Committee

68. RBI announced the guidelines to issue licenses to new banks of the private sector on:
(a) January 22, 1993 (b) March 15, 1995 (c) April 1, 1999 (d) None of these
Answer: (a) January 22, 1993
69. 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
Answer: (a) Reserve Bank of India
70. Banking Sector Reforms in India began in:
(a) 1969 (b) 1981 (c) 1991 (d) 2001
Answer: (c) 1991
71. 14 big scheduled commercial banks in India were nationalised in:
(a) 1949 (b) 1955 (c) 1969 (d) 2000
Answer: (c) 1969
72. Which is associated with reforms in the banking sector?
(a) Year 1991 (b) Narsimham Committee (c) Y.V. Reddy Committee (d) Only (a) and (b)
Answer: (d) Only (a) and (b)
73. “Money is what money does”. Who said this:
(a) Hartley Withers (b) Harte (c) Prof. Thomas (d) Keynes
Answer: (a) Hartley Withers
74. The function of money is:
(a) Medium of exchange (b) Measure of value (c) Store of value (d) All of the above
Answer: (a) Medium of exchange
75. The meaning of money supply is:
(a) Money deposits in the bank (b) Cash available with public
(c) Savings in the post office (d) All of the above
Answer: (d) All of the above.
76. What is the Central Bank of India?
(a) Commercial Banks (b) Central Bank (c) Private Bank (d) None of these
Answer: (a) Commercial Banks
77. Through which method we can withdraw money from the bank:
(a) Drawing letter (b) Cheque (c) A.T.M. (d) All of the above
Answer: (d) All of the above.
78. Who is the guardian of the Indian Banking System:
(a) Reserve Bank of India (b) State Bank of India
(c) Unit Trust of India (d) Life Insurance Company of India.
Answer: (a) Reserve Bank of India
79. Narasimham Committee is related to what:
(a) Improvement in Taxation (b) Improvement in Banking
(c) Improvement in Agriculture (d) Improvement in Infrastructure

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Answer: (b) Improvement in Banking

Fill in the blanks:
1. The exchange of goods for goods is called _____ exchange.
Answer: barter
2. ______ is a narrow concept of money.
Answer: M1
3. ________ is a broad concept of money.
Answer: M3
4. _______ are the deposits which are payable by the banks to the customers after a fixed period.
Answer: Time deposits
5. Currency money is also known as ______ money.
Answer: fiat
6. Supply of money is a _______ concept.
Answer: stock
7. The money multiplier is the rate of change in _____ due to initial deposits.
Answer: money supply
8. Currency with public means _____ and ______ with the public outside the bank.
Answer: coins, currency notes
9. _______ is the Central Bank of India.
Answer: RBI
10. Commercial banks are an important source of _________ in the economy.
Answer: money supply
11. Banks serve as a channel between _______ and investors.
Answer: depositors
12. Two essential functions of a bank are accepting deposit and ________
Answer: advancing loan
13. The Central Bank is the apex institution of the _______ system.
Answer: Monetary
14. Bank rate is the _______ instrument of Central Bank.
Answer: Quantitative
15. Central Bank of India is………………..
Answer: Reserve Bank of India
16. Bank rate is also known as………………..
Answer: Redemption
17. The bank generates……………….. deposits in credit creation.
Answer: Derivative
18. When CRR decreases, credit creation………………..
Answer: Increases
19. The measure of deferred payment is ……………….. function of money.
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Answer: Secondary
20. Medium of exchange is ……………….. function of money.
Answer: Primary
21. The static and dynamic function of money is divided by………………..
Answer: Paul Einzig
State true or false:
1. Money as a medium of exchange solves the problem of lack of double coincidence of want.
Answer: True
2. Legal tender money has a legal sanction behind it by the government.
Answer: True
3. M1 includes saving deposits of post office savings banks.
Answer: False
4. The money supply is a flow variable.
Answer: False
5. Commercial Bank plays no role in stock of money supply in the economy.
Answer: False
6. Credit money is money received as credit from banks.
Answer: False
7. Commercial banks do not create money.
Answer: False
8. Bank rate is a qualitative method of credit control.
Answer: False
9. There is an inverse relation between LRR and the size of the money multiplier.
Answer: True
10. Money is needed for day-to-day transactions.
Answer: True
11. The precautionary demand for money increases with the proportionate increase in income.
Answer: True
12. Reserve Bank of India provides loans to the public.
Answer: False
13. Along with the Reserve Bank of India, Commercial banks are also authorized to issue currency.
Answer: False
14. Reliable money also includes cheques.
Answer: False
15. Reserve Bank of India cannot become the owner of any real estate.
Answer: True

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