Online Test — Money and Banking
15 Questions • 15 min • Chapter MCQ
15:00
Question 1 of 15
Money is anything generally accepted as a:
Medium of exchange
Tax
Subsidy
Loan
Explanation: Money is a generally accepted medium of exchange.
Question 2 of 15
The primary function of money is as a:
Store of value
Medium of exchange
Measure of value
Deferred payment
Explanation: The medium of exchange is the primary function.
Question 3 of 15
Holding money for everyday payments is the ____ motive.
Transactions
Speculative
Precautionary
Profit
Explanation: Money for daily payments is the transactions motive.
Question 4 of 15
The supply of money is a:
Flow
Stock
Rate
Ratio
Explanation: Money supply is a stock (held at a point of time).
Question 5 of 15
M1 (narrow money) includes currency with the public plus:
Time deposits
Demand deposits and other deposits with RBI
Gold reserves
Government cash
Explanation: M1 = currency + demand deposits + other deposits with RBI.
Question 6 of 15
Broad money is denoted by:
M1
M3
M0
M-1
Explanation: M3 (M1 + time deposits) is broad money.
Question 7 of 15
The two primary functions of a commercial bank are accepting deposits and:
Advancing loans
Issuing currency
Collecting taxes
Printing notes
Explanation: Banks accept deposits and advance loans.
Question 8 of 15
The money multiplier equals:
1 ÷ LRR
LRR × 100
LRR ÷ 2
1 − LRR
Explanation: Money multiplier = 1 ÷ legal reserve ratio.
Question 9 of 15
If LRR = 20%, the money multiplier is:
2
5
20
0.2
Explanation: 1 ÷ 0.20 = 5.
Question 10 of 15
A lower reserve ratio means credit creation:
Increases
Decreases
Stops
Stays the same
Explanation: A lower reserve ratio raises the multiplier, increasing credit.
Question 11 of 15
The central bank of India is the:
SBI
RBI
World Bank
IMF
Explanation: The Reserve Bank of India is the central bank.
Question 12 of 15
The sole right to issue currency notes is the RBI's role as:
Currency authority
Banker's bank
Lender of last resort
Tax collector
Explanation: Issuing currency is the currency-authority function.
Question 13 of 15
The rate at which the RBI lends to banks is the:
Repo rate
Reverse repo rate
SLR
CRR
Explanation: The repo rate is the RBI's lending rate to banks.
Question 14 of 15
The fraction of deposits banks must keep as cash with the RBI is the:
SLR
CRR
Repo rate
Bank rate
Explanation: CRR is the cash reserve ratio kept with the RBI.
Question 15 of 15
To control inflation, the RBI would:
Raise the repo rate and CRR
Lower the repo rate
Buy securities
Reduce the SLR
Explanation: Tightening (higher repo/CRR) reduces money supply to cool inflation.