Quiz For Money And Banking

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Quiz For Money And Banking - Quiz

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 exchange
    Explanation
    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.

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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 goods
    Explanation
    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.

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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 exchange                                              
    Explanation
    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.

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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 value                                             
    Explanation
    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.

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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 banks                                                  
    Explanation
    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.

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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. RBI 
    Explanation
    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.

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  • 7. 

    Commercial bank also has authority to issue currency.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    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.

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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. False
    Explanation
    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.

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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. False
    Explanation
    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.

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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. True
    Explanation
    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.

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  • Current Version
  • Mar 22, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Apr 05, 2020
    Quiz Created by
    Laksh
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