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Money and Banking Test - 4

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Money and Banking Test - 4
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Weekly Quiz Competition
  • Question 1
    1 / -0

    M1 includes

    Solution

    M1 includes money held by public +demand deposits +other deposits by RBI. 

  • Question 2
    1 / -0

    Money is a medium of

    Solution

    Money is universally accepted as a medium of exchange. It can be used to buy anything worldwide.

  • Question 3
    1 / -0

    One of the type of deposit accounts with the commercial banks is


    Solution

    Money is deposited in savings account and remains probably most  liquid in this account. 

  • Question 4
    1 / -0

    Money supply is equal to

    Solution

    Supply of money is a stock variable. Any money must circulate  (used for transactions )to be called money .

  • Question 5
    1 / -0

    M2 includes M1 and

    Solution

    M2=M1+saving deposits of post office savings bank. 

  • Question 6
    1 / -0

    Money overcomes the problems of barter system. 

    Solution

    The most crucial limitation of barter system is double coincidence of wants. Use of money eliminates this limitation and many others.

  • Question 7
    1 / -0

    Central Bank is an

    Solution

    It is the highest banking authority in an economy. Therefore, it is also known as apex body in banking sector.

  • Question 8
    1 / -0

    Legal reserve ratio is equal to 

    Solution

    As per the definition of LRR. 

  • Question 9
    1 / -0

    Lending rate is for

    Solution

    Public borrowers from commercial banks and not from central bank.

  • Question 10
    1 / -0

    The lender of last resort is not a function of

    Solution

    It itself lends from central bank and thus has not such bulk supply of money.

  • Question 11
    1 / -0

    Money is something that is

    Solution

    Money is widely accepted as a medium of exchange. It can be used to buy a commodity.

  • Question 12
    1 / -0

    The functions of money is that it is a

    Solution

    Person can store money for future consumption.

  • Question 13
    1 / -0

    Bank rate is for

    Solution

    Central bank is a wholesaler of money and commercial bank is its retailer

  • Question 14
    1 / -0

    One drawback of barter exchange is

    Solution

    The functioning of the barter system requires a double coincidence of wants on the part of those who want to exchange goods or services. It is necessary for a person who wishes to trade his good or service to find some other person who is not only willing to buy his good or service, but also possesses that good which the former wants.
    The existence of such a double coincidence of wants is a remote probability. For, it is a very laborious and time-consuming process to find out person who want each other’s goods.

  • Question 15
    1 / -0

    Open market operations is

    Solution

    Doing so is the responsibility of central banks to control credit in the economy .

  • Question 16
    1 / -0

    Open market operations is done by


    Solution

    Central bank is the only  bank which can maintain stablity in monetary sector.

  • Question 17
    1 / -0

    The lender of last resort is a function of


    Solution

    Central bank is the wholesaler of all commercial banks.

  • Question 18
    1 / -0

    Statutory Liquidity ratio is a percentage of total deposits which the commercial banks  keep with themselves law.

    Solution

    It's as per definition. 

  • Question 19
    1 / -0

    Statutory Liquidity ratio is 

    Solution

    It's as per the definition . 

  • Question 20
    1 / -0

    Barter system is now replaced by

    Solution

    Monetary system overcomes all drawbacks of barter system. 

  • Question 21
    1 / -0

    One of the measures of money supply is

    Solution

    M1 captures the most liquid components of the money supply. It includes currency held by the public and checkable deposits in banks.

  • Question 22
    1 / -0

    Barter system is

    Solution

    A barter system is an old method of exchange. This system has been used for centuries and long before money was invented. People exchanged services and goods for other services and goods in return.

  • Question 23
    1 / -0

    What do you mean by credit creation by commercial banks?


    Solution

    It is done through Legal reserve ratio.

  • Question 24
    1 / -0

    The process of money creation or credit creation is done by


    Solution

    The LRR(Legal reserve ratio) allows commercial banks to keep a certain fraction of their deposits as reserve and use the rest for giving credit. The cycle of transations that happen in this proocess help create money.

  • Question 25
    1 / -0

    Cash reserve ratio is a 

    Solution

    It's as per the definition of CRR.

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