Quiz For Money And Banking
This QUIZ will help you to check your understanding from the chapter-Money and Banking.
Topics covered are:
Barter system and its limitations
Meaning and functions of money
Central Bank and its functions
Tools of credit control by R. B. I
Money Supply
Questions and Answers
- 1.
Which of the following is not a drawback of Barter System?
- A.
Lack of double coincidence of wants
- B.
Lack of store of value
- C.
Medium of exchange
- D.
Lack of standard of deferred payment
Correct Answer
C. Medium of exchangeExplanation
The medium of exchange is not a drawback of the barter system. In a barter system, goods and services are directly exchanged without the need for a medium of exchange like money. While the barter system may have drawbacks such as the lack of double coincidence of wants, lack of store of value, and lack of standard of deferred payment, the medium of exchange is not one of them.Rate this question:
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- 2.
Barter system refers to that system wherein:
- A.
Goods are exchanged for goods
- B.
Goods are exchanged for domestic currency
- C.
Goods are exchanged for foreign currency
- D.
None of the above
Correct Answer
A. Goods are exchanged for goodsExplanation
The correct answer is "Goods are exchanged for goods." This refers to the barter system, which is a system of trade where goods or services are directly exchanged for other goods or services without the use of money. In this system, individuals or businesses trade their surplus goods or services for the goods or services they need. This eliminates the need for a medium of exchange, such as currency, and relies solely on the mutual agreement between parties involved in the trade.Rate this question:
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- 3.
“Use of money separates the acts of sale and purchase”. Which function of money is highlighted in the statement?
- A.
Medium of exchange
- B.
Store of value
- C.
Standard of deferred payment
- D.
Transfer of value
Correct Answer
A. Medium of exchangeExplanation
The function of money highlighted in the statement is the medium of exchange. This function refers to the use of money as a commonly accepted form of payment for goods and services. In this context, the statement suggests that the acts of sale and purchase are separate because money is used as an intermediary in the exchange process.Rate this question:
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- 4.
Which of the following function of money helped to overcome the problem of store of wealth under barter system?
- A.
Store of value
- B.
Unit of value
- C.
Medium of exchange
- D.
Unit of account
Correct Answer
A. Store of valueExplanation
The function of money that helped to overcome the problem of store of wealth under the barter system is "Store of value". Money serves as a store of value because it can be saved and used for future purchases. Unlike perishable goods or other forms of wealth in the barter system, money retains its value over time and can be easily stored and retrieved when needed. This allows individuals to accumulate wealth and have confidence in the value of their savings.Rate this question:
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- 5.
Central bank grants loan to__________
- A.
General public
- B.
Commercial banks
- C.
Private companies
- D.
All of the above
Correct Answer
B. Commercial banksExplanation
Central banks grant loans to commercial banks. This is because commercial banks play a crucial role in the economy by providing loans to individuals and businesses. Central banks provide loans to commercial banks to ensure the stability and liquidity of the banking system. By granting loans to commercial banks, central banks can influence the money supply and interest rates, which in turn affects economic activity and inflation. Therefore, the correct answer is commercial banks.Rate this question:
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- 6.
Who is the custodian of foreign exchange reserves?
- A.
RBI
- B.
ICICI
- C.
HDFC
- D.
Government of India
Correct Answer
A. RBIExplanation
The Reserve Bank of India (RBI) is the custodian of foreign exchange reserves. As the central bank of India, it is responsible for managing the country's foreign exchange reserves, which are held in various forms such as foreign currencies, gold, and special drawing rights (SDRs). The RBI plays a crucial role in maintaining the stability of the Indian rupee and managing the balance of payments. It also formulates and implements the country's foreign exchange policies to ensure a smooth functioning of the economy and meet the external payment obligations.Rate this question:
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- 7.
Commercial bank also has authority to issue currency.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Commercial banks do not have the authority to issue currency. The authority to issue currency lies with the central bank of a country, such as the Federal Reserve in the United States. Commercial banks can only distribute and handle the currency issued by the central bank.Rate this question:
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- 8.
Margin requirement is raised by the central bank with a view to increasing money supply.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement is false. Margin requirements are actually raised by the central bank with the intention of reducing money supply. By increasing margin requirements, the central bank is able to limit the amount of credit available in the economy, which in turn decreases the money supply. This is done to control inflation and stabilize the economy.Rate this question:
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- 9.
CRR refers to the minimum percentage of total demand and time deposits to be kept by commercial banks with themselves.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The explanation for the given answer "False" is that CRR stands for Cash Reserve Ratio, not "minimum percentage of total demand and time deposits to be kept by commercial banks with themselves." CRR is the percentage of a bank's total deposits that it must keep as reserves with the central bank. Therefore, the statement in the question is incorrect.Rate this question:
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- 10.
Bank rate is the rate at which the central bank lends money to commercial banks.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Bank rate refers to the rate at which the central bank provides loans to commercial banks. This rate is an important tool used by central banks to control the money supply and influence interest rates in the economy. By increasing the bank rate, the central bank can make borrowing more expensive for commercial banks, thereby reducing the amount of money in circulation and curbing inflation. Conversely, a decrease in the bank rate encourages borrowing and stimulates economic activity. Therefore, the statement that bank rate is the rate at which the central bank lends money to commercial banks is true.Rate this question:
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Mar 22, 2023Quiz Edited by
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Apr 05, 2020Quiz Created by
Laksh
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