MCQ Questions Chapter 9 Money and Banking Class 12 Economics

Please refer to MCQ Questions Chapter 9 Money and Banking Class 12 Economics with answers provided below. These multiple-choice questions have been developed based on the latest NCERT book for class 12 Economics issued for the current academic year. We have provided MCQ Questions for Class 12 Economics for all chapters on our website. Students should learn the objective based questions for Chapter 9 Money and Banking in Class 12 Economics provided below to get more marks in exams.

Chapter 9 Money and Banking MCQ Questions

Please refer to the following Chapter 9 Money and Banking MCQ Questions Class 12 Economics with solutions for all important topics in the chapter.

MCQ Questions Answers for Chapter 9 Money and Banking Class 12 Economics

Question: Money is:
(a) anything which requires double coincidence of wants
(b) anything which is commonly accepted as a medium of exchange
(c) anything which is commonly accepted as a commodity money
(d) none of these 

Question: MC=MR=AC=AR refers to long term equilibrium of
(a) Competitive firm
(b) Oligopoly firm
(c) Monopoly firm
(d) None of these 

Question: A firm reaches shut down point when
(a) TR=TVC
(b) TR=TC
(c) TC = AVC
(d) MC=AC

Question. Higher the legal reserve ratio _________will be the credit creation.   
(a) higher
(b) lower
(c) constant
(d) infinite

Question. Who regulates money supply in India? 
(a) Government of India
(b) Reserve Bank of India
(c) Panning Commission
(d) Commercial banks

Question. Starting with an initial deposit of ₹1000 crores, if the final amount of credit created in an economy is ₹5000 crores, what is the value of legal reserve ratio? 
(a)25%
(b) 4%
(c) 20%
(d) 50%

Question. Credit creation by commercial banks is determined by 
(a) CRR
(b) SLR
(c) Initial deposits
(d) all of the above

Question. Demand deposits include _________. 
(a) Saving account deposits and fixed deposits
(b) Saving account deposits and current account deposits
(c) Current account deposits and fixed deposits
(d) All types of deposits

Question. Identify the correct statement: 
(a)Commercial banks acts as an agent to the government.
(b) Commercial banks are able to create credit which is far in excess of the initial deposits.
(c) Loans offered by commercial banks are equal to deposits received by them.
(d) Commercial banks do not contribute to stock of money supply in an economy.

Question: Money which is accepted as a medium of exchange because of the trust between the payer and the payee is called:
(a) full bodied money
(b) credit money
(c) fiat money
(d) fiduciary money 

Question: For the commercial banks, the source of profit is:
(a) unclaimed deposits
(b) grants by the government
(c) spread: the difference between the interest they charge and the interest they pay
(d) none of these

Question: Primary deposits are:
(a) cash deposits with the commercial banks
(b) gold reserves with the commercial banks
(c) reserves of foreign exchange
(d) none of these 

Question: Money that is issued by the authority of the government is called:
(a) full bodied money
(b) credit money
(c) fiat money
(d) fiduciary money 

Question: TR>TC is a situation of
(a) Normal profit
(b) Normal losses
(c) Abnormal profits
(d) Abnormal losses 

Question: Normal profits occur when
(a) AR>AC
(b) AR=AC
(c) AR<AC
(d) TR>TC 

Question: When supply curve is a vertical straight-line, it indicates:
(a) Unitary elastic supply
(b) Perfectly elastic supply
(c) Perfectly inelastic supply
(d) Relatively elastic supply

Question: Evolution of money has facilitated:
(a) a common unit of exchange
(c) transfer of value
(b) store of value
(d) all of these 

Question:  With the introduction of money:
(a) acts of sale and purchase have been separated
(b) acts of exchange have been separated
(c) acts of production and consumption have been separated
(d) both (b) and (c) 

Question: If elasticity of supply is equal to unity, what will be the percentage increase in supply as a result of 15 percent rise in price of a commodity?
(a) 8%
(b) 12%
(c) 0%
(d) 15%

Question: If 8% rise in price causes 27% increase in supply, elasticity of supply will be :
(a) 1.5
(b) 0.5
(c) 3.5
(d) 2.5

Question:  In case of credit money:
(a) money value = commodity value
(c) money value < commodity value
(b) money value > commodity value
(d) none of these 

Question:  e-money functions as a medium of exchange by way of:
(a) transfer of value from one account to the other
(b) cash payments
(c) payments through cheques
(d) all of these 

Question:  Which of the following is not a component of M1 measurement of money supply?
(a) Demand deposits
(b) Currency
(c) Other deposits
(d) Term deposits 

Question:  In India, coins are issued by:
(a) State Bank of India
(b) Reserve Bank of lndia
(c) Ministry of Finance
(d) Ministry of Urban development 

Question:  Term deposits are those:
(a) against which no cheque can be issued
(b) against which no interest is paid to the depositors
(c) which are fixed deposits
(d) both (a) and (c) 

Question:  A commercial bank is that financial institution:
(a) which only accepts deposits from the people
(b) which only offers loans to the people
(c) which accepts deposits from the people as well as offers loans to them
(d) which only deals in foreign exchange transactions 

Question:  Money value is equal to commodity value in case of:
(a) fiat money
(b) full bodied money
(c) fiduciary money
(d) credit money 

Question:  Electronic transfer of money in terms of credit/debit entries of the account-holders in the banks is called:
(a) e-marketing
(c) e-money
(b) e-business
(d) e-banking 

Question: The rise in supply due to rise in price is called:
(a) Increase in supply
(b) Decrease in supply
(c) Extension of supply
(d) None of these 

Question: When supply falls due to factors other than own price of the commodity it indicates
(a) Contraction in supply
(b) Decrease in supply
(c) Extension in supply
(d) None of these

Question: An upward sloping straight line supply curve shooting from the X- axis indicates that:
(a) Elasticity of supply is equal to zero
(b) Elasticity of supply is equal to one
(c) Elasticity of supply is greater than one
(d) Elasticity of supply is less than one 

Question:  Which of the following is correct?
(a) Supply of money is a stock concept
(b) Supply of money does not include stock of money held by the government
(c) Supply of money does not include stock of money held by the banking system of a country
(d) All of these 

Question:  Which of the following systems is followed by Reserve Bank of India for issuing currency?
(a) Proportionate system
(b) Simple deposit system
(c) Minimum reserve system
(d) Fixed fiduciary issue system 

Question: Which one of the following is correct?
(a) TC= TFC x TVC
(b) TC= TFC / TVC
(c) TC= TFC + TVC
(d) TC= TFC- TVC 

Question:  Money is a:
(a) static factor
(b) dynamic factor
(c) contingent factor
(d) all of these   

Question: Movement along the supply curve occurs due to :
(a) Increase in own price of the commodity
(b) Decrease in own price of the commodity
(c) Facton other than own price of the commodity
(d) Both (a) and (b)

Question: Average fixed cost (AFC) is indicated by:
(a) Rectangular hyperbola
(b) a straight line parallel to X- axis
(c) a straight line parallel X- axis
(d) U- shaped curve

Question: Which of the following indicates fixed cost?
(a) Electricity bill
(b) Expenses on raw material
(c) Wages of daily workers
(d) Interest on fixed capital 

Question:  Which of the following is the basic characteristic of the barter system of exchange?
(a) Medium of exchange
(b) Double coincidence of wants
(c) Store of value
(d) Both (a) and (c) 

Question:  C-C economy refers to that system where:
(a) goods are exchanged for goods
(b) goods are exchanged for domestic currency
(c) goods are exchanged for foreign currency
(d) goods are not exchanged at all 

Question: When production is zero, total cost (TC) will be:
(a) Zero
(b) Equal to variable cost
(c) Equal to total fixed cost
(d) Equal to marginal cost 

Question:  A system in which commodities are exchanged for commodities is called:
(a) barter system of exchange
(b) monetary system of exchange
(c) commodity for commodity exchange economy
(d) both (a) and (c) 

Question:  Those deposits against which money cannot be withdrawn any time are called:
(a) fixed deposits
(b) term deposits
(c) non-chequeable deposits
(d) all of these 

Question:  Commercial banks advance loans:
(a) only to the extent of their term deposits
(b) only to the extent of their gold reserves
(c) only to the extent of their demand deposits
(d) multiple times of their required cash reserves with the RBI 

Question: When MC curve cuts AC curse:
(a) AC= MC
(b) AC< MC
(c) AC> MC
(d) Both AC and MC are falling 

Question: When production level is zero, then fixed cost is:
(a) Zero
(b) Negative
(c) Positive
(d) Equal to variable cost

Question: The costs which do change with change in the quantity of output are called:
(a) Supplementary costs
(b) Money costs
(c) Real costs
(d) None of these

Question: At break-even point , a firm makes :
(a) Normal profits
(b) Extra normal profits
(c) Extra normal losses
(d) None of these 

Question: Which of the following statements is correct?
(a) There is difference between supply and stock
(b) Supply does not depend on governments tax- policy
(c) Stock refers to the quantity which comes to market for sale
(d) Stock and supply are always equal 

Assertion-Reasoning Questions :

Question. Assertion(A): Commercial banks contribute to quantum of money supply in the economy. 
Reason(R): Commercial banks create credit through the process of money creation.
Alternatives:
(a) Both Assertion(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.

Question. Assertion(A): All financial institutions can be termed as banking institutions. 
Reason(R): A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously advancing loans.
Alternatives:
(a) Both Assertion(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.

Question. Assertion(A): Central bank has the responsibility of managing public debt. 
Reason(R): Central bank aims to maximize profits.
Alternatives:
(a) Both Assertion(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.

Question. Assertion(A): Reserve ratio acts as a limit to money creation by commercial banks. 
Reason(R): The value of money multiplier is determined by Reserve Ratio.
Alternatives:
(a) Both Assertion(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.

Question. Assertion(A): Central bank directly deals with the public. 
Reason(R): All commercial banks have their accounts with the central bank.
Alternatives:
(a) Both Assertion(A) and Reason(R) are true and Reason(R) is the correct explanation ofAssertion(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.

Question. Assertion(A): RBI acts as a banker to the central government and commercial banks act as a banker to   the state governments.
Reason(R): Central government keeps its cash balances with the RBI. 
Alternatives:
(a) Both Assertion(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.

Fill In The Blanks

Question: _______ is called monetary base in the economy. (Bank money/High powered money)

Question: Money was evolved in order to remove the drawbacks of _______ system.(barter/monetary) 

Question: Credit money is that money whose money value is_______ than its commodity value.(more/less)  

Question: Supply of money means stock of money with the _______ .(people/supplier of money)

Question: Anything can be money which is generally accepted as _______ .(medium of exchange/medium of store)

Question: _______ money is issued by order of the government. (Fiat/Fiduciary)   

Question: _______ demand deposits are taken as a part of money supply. (Gross/Net)

True / False

Question: Full-bodied money is that money whose money value is equal to its commodity value.

Question: Cheques are fiduciary money.

Question: Term deposits are deposits withdrawn by cheque. 

Question: In India, one rupee notes are issued by the Government of lndia.

Question: In India, note issue system conforms to Minimum Reserve System.

Question: Money value of a paper note is what is written on it.

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