Class XII Economics - Indian Economic - Banking HY PART 1

JavaScript isn't enabled in your browser, so this file can't be opened. Enable and reload.

Class XII Economics - Indian Economic - Banking HY PART 1

Email *

Sub-Topic : Banking Multiple Choice Questions 1. Commercial banks create money by way of: *

1 point

Fixed deposits

Demand deposits

Treasury bills

Bill of exchange

2. Which of the following Is not concerned with banking organization? *

1 point

Bank rate

Fiscal deficit

Credit creation

Cash reserve ratio

3. Central Bank is an open bank of the country that: *

1 point

Controls the entire banking system of the country

Issues currency

Acts as a banker to the government

All of these

4. CRR in India is fixed by: *

1 point

The commercial banks

The government

The RBI

The RBI and commercial banks

5. Reserve repo rate: *

1 point

Generates interest income

Is increased to control inflation

Is not a policy rate

Both (a) and (b)

6. In India, the central bank is____________ *

1 point

Federal Reserve System

Federal System

Reserve Bank of India

Both (a) and (b)

7. Open market operations as an instrument of credit control are performed by: *

1 point

The central bank of the country

The commercial bank of the country

Option 3

None of these

8. As an advisor to the government central bank frames policies to regulate the: *

1 point

Money market

Capital Market

Financial and Capital market

none of these

9. Formula to calculate money multiplier_________ *

1 point

1/CRR

1/SLR

1/CRR*1/SLR

1/LRR

10. Credit cards issued by the banks are___________ *

1 point

Encourage consumer spending

Increase aggregate demand the economy

Increase in aggregate supply

both (a) and (b)

Money and Banking Assertion and Reasoning Questions1. Read the following statements Assertion (A) and Reason (R). Choose the correct alternatives given below. Assertion (A): Higher the legal reserve ratio lowers the credit creation and lower the reserve ratio higher will be the credit creation.Reason (R): Money/Deposit multiplier is a multiple by which total deposits increases due to primary deposits. It refers to the amount by which the initial deposits multiply into a large amount of the deposits.Money multiplier = 1/LRR/RDR(LRR= Legal reserve ratio, Reserve Deposit ratio)Alternatives: *

1 point

Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation ofAssertion (A).

Both Assertion (A) and Reason (R) are true and Reason (R) is the not correct explanation ofAssertion (A)

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

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

2. Read the following statements Assertion (A) and Reason (R). Choose the correct alternativesgiven below. Assertion (A): To boost the falling demand in the economy. Reserve bank of India recentlyreduced repo rate and bank rate.Reason (R): Decrease in repo rate and bank rate causes decreases in the rate of interest whichleads to rise demand of credit because of which more money flows into the economy, Purchasingpower of people increases. Thus aggregate demand rises and deficient demand is corrected.Alternatives: *

1 point

Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation ofAssertion (A).

Both Assertion (A) and Reason (R) are true and Reason (R) is the not correct explanation ofAssertion (A)

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

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

3. Read the following statements Assertion (A) and Reason (R). Choose the correct alternativesgiven below. [1]Assertion (A): There are two components of money supply currency held by the public and thedemand deposits held by the commercial banks.Reason (R): Money supply is a stock variable and refers to the stock of money held by the publicin spendable forms i.e money supply refers to the stock of money in circulation in an economy.Alternatives: *

1 point

Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation ofAssertion (A).

Both Assertion (A) and Reason (R) are true and Reason (R) is the not correct explanation ofAssertion (A)

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

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

4. Read the following statements Assertion (A) and Reason (R). Choose the correct alternativesgiven below. Assertion (A): Anything will be called money if the law of country proclaims it to be money. Itwill 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 inIndia, coins up to Rs1000 only (as per coinage bill, August 2011) can be accepted legally inpayment. All currency notes have unlimited legal tender.Alternatives: *

1 point

Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation ofAssertion (A).

Both Assertion (A) and Reason (R) are true and Reason (R) is the not correct explanation ofAssertion (A)

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

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

5. Read the following statements Assertion (A) and Reason (R). Choose the correct alternativesgiven below. Assertion (A): Central bank of a country has the exclusive right (monopoly right) of issuingcurrency notes (except one rupee note/coin) and central bank has the complete power to themoney supply and credit in the country.Reason (R): Central bank can use only quantitative method to control credit.Alternatives: *

1 point

Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation ofAssertion (A).

Both Assertion (A) and Reason (R) are true and Reason (R) is the not correct explanation ofAssertion (A)

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

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

6. Read the following statements Assertion (A) and Reason (R). Choose the correct alternativesgiven below. Assertion (A): Money supply is a flow concept.Reason (R): Money Supply always measured at a particular point of timeAlternatives: *

1 point

Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation ofAssertion (A).

Both Assertion (A) and Reason (R) are true and Reason (R) is the not correct explanation ofAssertion (A)

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

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

7. Read the following statements Assertion (A) and Reason (R). Choose the correct alternativesgiven below. Assertion (A): Central bank acts as a banker to the government as a custodian of cash reserves.Reason (R): The central bank acts as a clearing house for transfer and settlement of mutualclaims of commercial banks.Alternatives: *

1 point

Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation ofAssertion (A).

Both Assertion (A) and Reason (R) are true and Reason (R) is the not correct explanation ofAssertion (A)

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

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

8. Read the following statements Assertion (A) and Reason (R). Choose the correct alternativesgiven below. Assertion (A): The reserve bank of India had in March 2020 offered a three months moratoriumon 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: *

1 point

Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation ofAssertion (A).

Both Assertion (A) and Reason (R) are true and Reason (R) is the not correct explanation ofAssertion (A)

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

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

9. Read the following statements Assertion (A) and Reason (R). Choose the correct alternativesgiven below. [1]Assertion (A): Central Bank is the Lender of the last Resort.Reason (R): 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 shutdown.Alternatives: *

1 point

Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation ofAssertion (A).

Both Assertion (A) and Reason (R) are true and Reason (R) is the not correct explanation ofAssertion (A)

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

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

10. Read the following statements Assertion (A) and Reason (R). Choose the correct alternatives given below. [1]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: *

1 point

Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation ofAssertion (A).

Both Assertion (A) and Reason (R) are true and Reason (R) is the not correct explanation ofAssertion (A)

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

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

Case Based QuestionsRead the following article and answer the questions given below:The reserve bank of India unexpectedly cut its key deposit rate for the second time in threeweeks, to discourage banks from parking idle funds with it and spur lending instead, to revive aflagging economy amid the corona virus lockdown.This week, Prime Minister Narendra Modi extended until May 3 a lockdown of population of 1.3billion as India’s tally of infections exceeded 10000, despite the 3 week shutdown order fromMarch 24.The RBI cut its reverse repo rate by 25 basis points (bps) to 3.75 percent with immediateeffect.Governer Shaktikanta Das told a video conference. The rate had already been cut by 90bpson March 27.“The surplus liquidity in the banking system has risen significantly in the wake of governmentspending and the various liquidity enhancing measures undertaken by the RBI”.He added. “Inorder to encourage banks to deploy these surplus funds in investments and loans in productivesectors of the economy, it has been decided to reduce the fixed-rate reverse repo rate”. Questions:1. The Reserve Bank of India lowered reverse repo rate to discourage banks from parking idlefunds with ________ *

1 point

RBI

Commercial Banks

2. RBI’s measure of reduction in reverse repo rate is done to enable commercial banks_________ *

1 point

To use the surplus funds for investment

To grant loans for productive purposes

To widen economic and financial land space

all of these

3. Reverse repo rate is _______ to correct excess demand *

1 point

increased

decreased

4. When reverse repo rate is reduced, it__________ *

1 point

Discourages the commercial banks to park their surplus funds with RBI

Encourages the commercial banks to park their surplus funds with RBI

Both (a) and (b)

Neither (a) nor (b)

Read the following article and answer the questions given below:India’s total Money Supply (M3) stood at Rs 17804885 crore as on October 23rd 2020, recordinga rise of 11.60% over the same time last year. Currency with the public stood at Rs 2619612, up21.2% over the year. Demand deposits with banks were up 10% at Rs 1625734 crore. Timedeposits with banks were also up 10% at Rs 13518822 crore. The bank credit to commercialsector 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 fromcomponent side and sources side. One of the ways of measuring money supply is M3, which issum of the currency with the public, thedemand deposits with the banking system, which includecurrent deposits and saving deposits, the time deposits with the banking system, such as fixeddeposits and recurring deposits, and other deposits of RBI. The currency with the public hasgrown by more than 21% since June and so have bank deposits. This led to M3 growing by over12% since June.Heightened uncertainty in India caused by the corona virus pandemic has led to a surge incurrency in circulation as people hoard cash or park money in accessible deposits to safeguardthemselves against salary cut or job losses.Foreign money continuously keeps coming to India, Leading to an increase in demand for therupee against the dollar. To prevent rupee from appreciating, RBI sold rupees and bought dollarsadding to the increase in M3. Questions1. Money supply in the economy has increased over 5 months since June due to: *

1 point

Public holding cash for transaction and precautionary motive.

Inflow of foreign exchange.

Uncertaintycaused by corona virus pandemic

all of these

2. Sum of currency with public, demand deposits and time deposits with the bank is _________Measure of money supply. *

1 point

M2

M3

3._______ and ________ are the components of money supply. *

1 point

4. Money supply refers to the total _______ of money in circulation in the economy which can be directly used for transactions. *

1 point

stock

flow

Read the following article and answer the questions given below:The Reserve Bank of India, cut repo rate to 4.4%, the lowest in at least 15 years. Also, it reducedthe 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 Rs 1.37 lakh crore across the bankingsystem. RBI governor Dr.Shaktikanta Das predicted a big global recession and said India will notbe immune. It all depends how India responds to the situation. Aggregate demand may weakenand ease core inflation Questions:1. Cut in Repo rate by RBI is likely to ____________ the demand for goods and services in the economy. *

1 point

increase

decrease

2. Decrease in Cash Reserve Ratio will lead to ______________. *

1 point

Fall in aggregate demand

No charge in aggregate demand

Rise in aggregate demand

Fall in general price level

3. The deficiency by which actual aggregate demand exceeds aggregate supply required to establish full employment equilibrium is known as _____________ *

1 point

Inflationary gap

deflationarygap

Submit

Clear form

Never submit passwords through Google Forms.

This content is neither created nor endorsed by Google. Report Abuse - Terms of Service - Privacy Policy