Class 12 Economics Chapter 9 Money and Banking MCQ Questions with Answer

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Money and Banking Class 12 MCQ Class 12 MCQ is one of the best strategies to prepare for the CBSE Class 12 Board exam. If you want to complete a grasp concept or work on one’s score, there is no method except constant practice. Students can improve their speed and accuracy by doing more MCQ on Money and Banking Class 12 with Answers which will help them all through their board test.

Money and Banking Class 12 MCQ Questions with Answer

Class 12 Economics MCQ with answers are given here for Chapter 9 Money and Banking. These MCQs are based on the latest CBSE board syllabus and relate to the latest Class 12 Economics syllabus. By Solving these Class 12 MCQs, you will be able to analyze all of the concepts quickly in the chapter and get ready for the Class 12 Annual exam.

Learn MCQ of Money and Banking Class 12 PDF with Answers according to the latest CBSE and NCERT syllabus. Students should prepare for the examination by solving CBSE Money and Banking Class 12 MCQ with answers given below.

Question 1. Who regulates money supply in India?
(a) Government of India
(b) Reserve Bank of India
(c) Planning Commission
(d) NITI Aayog

Answer

B

Question 2. Supply of money refers to quantity of money –
(a) As on 31st March
(b) During any specified period of time
(c) As on any point of time
(d) During a fiscal year

Answer

C

Question 3. Money supply includes _
(a) All deposits in bank
(b) Only demand deposits in banks
(c) Only time deposits in banks
(d) Currency with the banks

Answer

B

Question 4. The creation of __ is called credit creation.
(a) time deposits
(b) primary deposits
(c) secondary deposits
(d) none of these

Answer

C

Question 5. __ is the main source of money supply in an economy.
(a) Central Bank
(b) Commercial Banks
(c) Government
(d) Both a and b

Answer

D

Question 6. _ is the primary function of money.
(a) transfer of value
(b) medium of exchange
(c) standard of deferred payment
(d) store of value

Answer

B

Question 7. High powered money includes –
(a) currency and demand deposits
(b) demand deposits and saving deposits
(c) currency held by public and cash reserves with banks
(d) none of these

Answer

C

Question 8. Money supply is a __ concept.
(a) Flow
(b) Stock
(c) Variable
(d) All of these

Answer

B

Question 9. _ are called legal tenders.
(a) demand deposits
(b) time deposits
(c) inter-bank deposits
(d) currency notes and coins

Answer

D

Question 10. Limitation of barter system of exchange
(a) lack of unit of value
(b) lack of store of value
(c) lack of standard of deferred payments
(d) all of these

Answer

D

Question 11. This function of the Central Bank involves buying and selling of government securities from or to the public.
(a) Selective Credit Controls
(b) Legal Reserve Requirements
(c) Open Market Operations
(d) None of these

Answer

C

Question 12. 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

Question 13. Which one of these is a limitation of the barter exchange?
(a) lack of double coincidence of wants
(b) lack of store of value
(c) lack of a common measure of value
(d) All of these

Answer

D

Question 14. Giving permission to withdraw money by an amount more than deposited to is known as ______
(a) Overdraft
(b) Advance
(c) Loan
(d) None of these

Answer

A

Question 15. Which out of the following items is not included in the money supply of a country?
(a) Time deposits
(b) Coins and Currency
(c) Demand Deposits
(d) None

Answer

A

Question 16. Which of the following deposits are also known as chequable deposits?
(a) Saving Account Deposits
(b) Demand Deposits
(c) Saving Account deposits plus fixed account deposits
(d) Current Account Deposits

Answer

B

Question 17. Credit Multiplier is:
(a) 1/CRR
(b) 1*CRR/10
(c) Cash * CRR
(d) None of these

Answer

A

Question 18. Which one of the following is true?
(a) Bank rate is the rate at which central bank is ready to give credit to commercial bank
(b) Bank rate and interest rates are different
(c) Bank rate is the discount rate of the central bank
(d) All of the above

Answer

D

Question 19. Quantitative measures/instruments of monetary policy (Policy of Central Bank) focuses on:
(a) quantity of money across selected sectors of the economy
(b) Quantity of money in the economy
(c) inflationary and deflationary gaps in the economy
(d) Both b) and c)

Answer

D

Question 20. The problem of “Double coincidence of wants” is solved by which of the following: –
(a) Goods
(b) Money
(c) Banks
(d) All of the above

Answer

B

Question 21. A owns a camel that he wants to trade for a goat. However, there are no sellers of goats in the market. This is an example of: –
(a) Lack of Double coincidence of wants
(b) Existence of Double coincidence of wants
(c) Simultaneous coincidence of wants
(d) Sequential coincidence of wants

Answer

A

Question 22. Credit money is increased when CRR:
(a) Falls
(b) Rises
(c) Both a) and b)
(d) None of these

Answer

A

Question 23. The system, wherein trade can be carried out through the exchange of goods and services is called the: –
(a) Barter system
(b) Monetary system
(c) Goods system
(d) None of the above

Answer

A

Question 24. Which of the following is not a measure of money supply ?
(a) M1
(b) M0
(c) M2
(d) M4

Answer

B

Question 25. Which of the following is the least liquid form of money supply ?
(a) M1
(b) M2
(c) M4 
(d) M3

Answer

C

Whoever needs to take the CBSE Class 12 Board Exam should look at this MCQ. To the Students who will show up in CBSE Class 12 Economics Board Exams, It is suggested to practice more and more questions. Aside from the sample paper you more likely had solved. These Money and Banking Class 12 MCQ are ready by the subject specialists themselves.

Question 26. Money, comprises of which of the following, which assist in conducting business transactions: – contains:
(a) Coins
(b) Currency notes
(c) Cheques
(d) All of the above

Answer

D

Question 27. The fraction of deposits to be kept by the bank, which cannot be given as loans is called
(a) LRR 
(b) SLR
(c) CRR
(d) None of the above

Answer

A

Question 28. M1 consists of, which of the following : –
(a) Currency held by public
(b) Demand deposits with commercial banks
(c) Other deposits with RBI
(d) All of the above

Answer

D

Question 29. Which of the following is not a Commercial Bank ?
(a) State bank of India ;
(b) Punjab National Bank ;
(c) RBI ;
(d) Canara Bank .

Answer

C

Question 30. Who regulate money supply in India
(a) Reserve Bank of India
(b) Government of India
(c) Commercial banks
(d) Planning Commission

Answer

A

Question 31. What are the total deposits if LRR is 25% and initial deposits are Rs. 100000?
(a) 250000
(b) 400000 
(c) 500000
(d) 800000

Answer

B

Question 32. Why do banks only keep a fraction of deposits ?
(a) All depositors do not withdraw at the same time
(b) There is constant flow of deposits in economy
(c) Both (a) and (b)
(d) None of the above

Answer

C

Question 33. Which of the following is the function of Central Bank ?
(a) Monopoly of Note Issue
(b) Banker of the Government
(c) Custodian of Foreign Exchange Reserves
(d) All the above

Answer

D

Question 34. What type of loan is advanced by Commercial Banks ?
(a) Cash Credit
(b) Overdraft
(c) Loan and Advance
(d) All of these

Answer

D

Question 35. “Money is a pivot around which the whole economy clusters.” Who said it ?
(a) Keynes
(b) Robertson
(c) Marshall
(d) Hawtrey

Answer

C

Question 36. The main function of commercial bank is :
(a) Credit control
(b) Loaning to other banks
(c) Accept deposits from customers
(d) All the above

Answer

C

Question 37. Which of the following issue paper currency in the country ?
(a) Central Bank 
(b) Commercial Bank
(c) World Bank
(d) Industrial Bank

Answer

A

Question 38. 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

Question 39. 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

Question 40. Which committee was constituted for suggesting consumer service improvements in banks ?
(a) Raja Chelliah Committee
(b) Chakrabarty Committee
(c) Verma Committee
(d) Goiporia Committee

Answer

D

Question 41. Who is the guardian of 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

Question 42. What is Central Bank of India ?
(a) Commercial Bank
(b) Central Bank
(c) Private Bank
(d) None of these

Answer

A

Question 43. Who is the custodian of Indian Banking system ?
(a) Reserve Bank of India
(b) State Bank of India
(c) Unit Trust of India
(d) LIC of India

Answer

A

Question 44. 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

Question 45. Assertion (A): Quantitative tools include persuasion by the central bank in order to make commercial banks discourage or encourage lending.
Reason (R): Quantitative tools control the extent of the money supply by changing the Cash Reserve Ratio (CRR) or Statutory Liquidity Ratio (SLR) or Bank Rate or Repo Rate or Reverse Repo Rate, or through Open market operations (OMO).
Alternatives:-
(a) Both Assertions (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 explanation of Assertion (A)
(c) Assertion (A) is True but Reason (R) is False
(d) Assertion (A) is False but Reason (R) is True

Answer

D

Question 46. Assertion (A): Higher the value of LRR, the higher the value of total deposits that are generated in the economy.
Reason (R): There exists an inverse relation between Money Multiplier and LRR.
Alternatives:-
(a) Both Assertions (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 explanation of Assertion (A)
(c) Assertion (A) is True but Reason (R) is False
(d) Assertion (A) is False but Reason (R) is True

Answer

D

Question 47. Assertion (A): Currency held by the public is a monetary liability of a central bank.
Reason (R): Central Bank controls credit, whereas commercial bank creates credit with the deposits.
Alternatives:-
(a) Both Assertions (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 explanation of Assertion (A)
(c) Assertion (A) is True but Reason (R) is False
(d) Assertion (A) is False but Reason (R) is True

Answer

A

Question 48. Assertion (A): Credit creation is inversely related to the money multiplier.
Reason (R): Credit creation = Initial Deposits × Money Multiplier (1/LRR). With the same initial deposit total credit, creation decreases with a decrease in the value of the money multiplier.
Alternatives:-
(a) Both Assertions (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 explanation of Assertion (A)
(c) Assertion (A) is True but Reason (R) is False
(d) Assertion (A) is False but Reason (R) is True

Answer

A

Question 49. Assertion (A): Besides the central banks, commercial banks are the other type of institutions that are a part of the money-creating system of the economy.
Reason (R): Commercial banks accept deposits from the public and lend out part of these funds to those who want to borrow.
Alternatives:-
(a) Both Assertions (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 explanation of Assertion (A)
(c) Assertion (A) is True but Reason (R) is False
(d) Assertion (A) is False but Reason (R) is True

Answer

A

Question 50. Assertion (A): LRR is the fraction of deposits that are kept with the central bank as cash reserves.
Reason (R): The value of LRR is decided by the central bank.
Alternatives:-
(a) Both Assertions (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 explanation of Assertion (A)
(c) Assertion (A) is True but Reason (R) is False
(d) Assertion (A) is False but Reason (R) is True

Answer

D

Money and Banking Class 12 MCQ

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Frequently Asked Question (FAQs)

How many MCQ questions are there in Class 12 Economics Chapter 9?

In Class 12 Economics Chapter 9, we have provided 50 Important MCQ Questions, But in the future, we will add more MCQs so that you can get good marks in the Class 12 exam.

Can we score good marks in Class 12 Economics with the help of Money and Banking MCQ Questions?

Yes, MCQ Question is one of the best strategies to make your preparation better for the CBSE Board Exam. It also helps to know the student’s basic understanding of each chapter. So, You can score good marks in the Class 12 Economics exam.