ECOVISONNAIRE WORKSHEET
SUB: ECONOMICS
CLASS: XII
TOPIC: MONEY AND BANKING
Q1. Two main components of money supply are
(a) Currency and time deposits
(b) Demand deposits and time deposits
(c) Currency and demand deposits
(d) Saving and current deposits
Q2. Money supply refers to:
(a) Total volume of money held by public at a particular point of time
(b) Total volume of money held by public over a period of time
(c) Total volume of money held by the government
(d) Both (a) and (b)
Q3. ____________ regulates money supply.
(a) Government of India (b) Reserve Bank of India
(c) Commercial Banks (d) Planning Commission
Q4. Which of the following is not a problem of barter system of
exchange?
(a) Store of Value (b) Double Coincidence of Wants
(c) Unit of Account (d) Distrust
Q5. Cheques are examples of ………… money.
(a) Fiduciary (b) Legal
(c) Fiat (d) None of these
Q6. M1 = Currency will Public + ………… + Other Deposits with RBI
(a) Time deposits with post offices
(b) Demand deposits with commercial banks
(c) Time deposits with commercial banks
(d) Demand deposits with post offices
Q7. Which of the following is / are not an assumption (s) of credit
creation process?
(i) Entire banking system is taken as a single unit.
(ii) All transactions are done through banks.
(iii) There is no saving in the economy.
(a) Only (i) (b) Only (ii)
(c) Only (iii) (d) both (i) and (ii)
Q8. RBI was set up in
(a) 1950
(b) 1947
(c) 1935
(d) 1874
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Q9. In order to correct the situation of deflation:-
(a) Securities are purchased by the commercial banks
(b) Securities are sold by the commercial banks
(c) Securities are purchased by the central bank
(d) Securities are sold by the central bank
Q10. The merit of issuing notes with RBI can be seen in
(a) Uniformity in note issue
(b) Stability in currency
(c) Control of credit
(d) All of the above
Q11. STATEMENT I- Money supply includes currency and demand
deposits.
STATEMENT II- Money supply is a flow concept.
(a) Both I and II are correct
(b) Both I and II are incorrect
(c) I is correct II is incorrect
(d) I is incorrect and II is correct
Q12. STATEMENT I- The central bank uses its Fiscal policy to control the
money supply
STATEMENT II- Central bank is the currency authority in India.
(a) Both I and II are correct
(b) Both I and II are incorrect
(c) I is correct II is incorrect
(d) I is incorrect and II is correct
Q13. Assertion (A): There are two components of money supply
currency held by the public and the demand deposits held by the
commercial banks.
Reason (R): Money supply is a stock variable and refers to the stock of
money held by the public in spendable forms i.e. money supply refers to
the stock of money in circulation in an 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 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
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Q14. Assertion (A): when there is inflationary situation in the economy,
the Margin requirements are increased.
Reason (R): Increase in Margin requirement helps reduce the money
supply 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 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
Q15. Match the following items in Column I and Column II and identify
the correct option.
COLUMN I COLUMN II
A SBI I Non-Banking Financial
Institution
B HDFC II Foreign bank
C HSBC III Public sector bank
D DHFL IV Private sector bank
(a)A(IV) B(III) C(II) D(I)
(b)A(III) B(IV) C(II) D(I)
(c)A(II) B(I) C(IV) D(III)
(d)A(III) B(II) C(I) D(IV)
Q16. Fill in the blanks
(a) Money was introduced due to failure of ____________.
(b) Deposits which are withdrawn on demand are called _____________.
(c) ______________ account deposits qualify the condition of being
demand deposits.
(d) ________________ banks are called financial intermediaries.
(e)Total deposits of a bank are of two types’ ___________ and __________.
(f)Formula for calculating money multiplier is____________.
(g) RBI prints and puts into circulation all currency denominations
except______________.
(h) During inflation RBI _____________ the Reverse Repo Rate.
(i) Buying and selling of government bonds or securities is termed as
___________.
(j) To reduce the volume of credit Legal Reserve Ratio is_____________.
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Q17. Answer the following questions in one word or one sentence.
(a) What is the total stock of money in circulation termed as?
(b) Who issues Rs.1 currency notes and coins?
(c) What are deposits of the public in savings, current and term deposit
called?
(d) What is short term lending rates of RBI termed as?
(e) What is the difference between the value of security and the loan
advanced termed as?
(f) What is the alternative name for legal tender money?
(g) What is value of money multiplier if primary deposit is 500cr and
legal Reserve 20%?
(h) What is the value of primary deposits if LRR is 10% and credit
created is 2000cr?
(i) What is alternative name of Secondary deposits?
(j) What is the rate at which the Central Bank lends to commercial
banks by purchasing or rediscounting the bills of exchange called?
Q18. State true or false giving reasons.
(a) Money supply includes term deposits.
(b) Primary deposits are also called total deposits.
(c) More the LRR, more is the money supply.
(d) Part of total reserves of commercial banks kept with central bank
is called SLR.
(e) Margin requirement is qualitative tool of credit control.
(f) If primary deposits are 5000 cr and secondary deposits 10000cr,
LRR is 10%
(g) During deflation Reverse Repo Rate is increased.
(h) Commercial banks are the controller of money supply.
(i) Government bonds are sold during inflation.
Q19. Briefly explain the components of money supply?
Q20.Explain the process of credit creation using LRR as 20% and
primary deposits as 100cr.
Q21. How does RBI play an important role of issuer of currency? How is
it helpful?
Q22. How is RBI a ‘Government’s Bank and Adviser’?
Q23. How is RBI a ‘Banker’s Bank’?
Q24. Explain any 3 Quantitative Measures of controlling the money
supply.
Q25. Explain any 3 Qualitative Measures of controlling the money
supply?
Q26. How will the following affect the money supply in the economy?
(a) Rise in Repo Rate (b) Decrease in SLR
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(c) Buying of government securities (d) Increase in margin
requirements
(e) Decrease in Cash Reserve Ratio
Q27. How will the following be used in the times of inflation?
(a) Repo Rate (b) Margin Requirements
(c) Open market operations (c) Statutory Liquidity Ratio
(e) Cash Reserve Ratio
Q28. How will the following be used in the times of deflation?
(a) Reverse Repo Rate (b) Bank Rate
(c) Open market operations (d) CRR
(e) Repo Rate
Q29. Explain the following functions of money.
a. Medium of exchange
b. Unit of account
c. Store of value
d. Standard for deferred payment
Q30. Calculate the value of money multiplier if the LRR is 10%
Q32. Calculate the value of money multiplier if the LRR is 20%.
Q33. Calculate the value of LRR if the value of money multiplier is 5.
Q34. Calculate the total deposits created if the value of initial deposits
is 500 cr and LRR 10%.
Q35. Find the value of initial deposits if the value of total deposits
created is 2000 cr and LRR is 50%.
Q36. RBI expected to hold interest rate this week
Downside risks to the RBI’s 9.5% growth projection have ebbed.
However, the central bank is expected to keep rates on hold and
continue with its accommodative stance in its monetary policy
committee (MPC) meeting, which concludes on August 6. According to
analyst, the first sign of a decision by the RBI tapering off its
accommodative policy would come from tolerance to higher yield in
government bond auctions.
“Our reading of high-frequency activity indicators suggests no reason
for the RBI to adjust its overall growth outlook, though its inflation
forecasts may need to be revived modestly higher,” said Barclays bank
chief economist Rahul Bajoria. According to Bajoria, liquidity
normalization is already under way and there is a notable reduction in
system liquidity during Q1 of 2021. “Moreover we think the rise in
liquidity during the past month indicates that the RBI is adopting a
‘passive strategy’, which will allow organic factors like currency in
circulation to slowly drain the liquidity surplus over time, he said.
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After cutting the repo rate (at which it lends to banks) to a record low of
4% by May 2020 amid the lockdown, the RBI has kept rates on hold for
well over a year.
While India was hit hard by the Delta variant that resulted in the second
wave of the pandemic, the economic impact has been shorter.
A. Reverse Repo is usually lower than the Repo Rate
a. True b. False
B. The above paragraph covers _______________ function of the central
bank.
a. Currency authority
b. Banker’s Bank
c. Government’s Bank
d. Controller of money supply
C. The current Repo Rate is _____________.
a. 6% b. 8.5% c. 4% d. None of these
D. Repo Rate is kept low to:
a. Control Inflationary situation
b. Control deflationary situation
c. Both of these
d. None of these
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