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12th Grade > Economics - 2

THE BANKING SYSTEM MCQs

Total Questions : 27 | Page 1 of 3 pages
Question 1. Deposits in the banks are:
  1.    Assets of the bank
  2.    Liabilities of the bank
  3.    Liabilities of the depositors
  4.    None of the above
 Discuss Question
Answer: Option B. -> Liabilities of the bank
:
B
Deposits are part of the liabilities of the bank.
Question 2. How many major motives exist to hold money with oneself?
  1.    1
  2.    2
  3.    3
  4.    4
 Discuss Question
Answer: Option C. -> 3
:
C
There are 3 major motives to hold money.
Question 3. When interest rates are high, speculative demand for money is ________. 
  1.    High
  2.    Low
  3.    Independent of interest rates
  4.    Invariable
 Discuss Question
Answer: Option B. -> Low
:
B
Speculative demand for money is low when interest rates are high as people convert their money to bonds and stocks.
Question 4. Maximum credit that the commercial banks can legally create is indicated by:
  1.    1SLR
  2.    1CRR×1Cash Reserves with the RBI
  3.    1CRR×Total deposits
  4.    1CRR×Cash reserves with the RBI
 Discuss Question
Answer: Option C. -> 1CRR×Total deposits
:
C
1CRR×Total deposits is the total amount of credit banks can create.
Question 5. Which of the following is not concerned with banking organisations?
  1.    Bank rate
  2.    Fiscal deficit
  3.    Credit creation
  4.    Cash reserve ratio
 Discuss Question
Answer: Option B. -> Fiscal deficit
:
B
Bank rate, CRR and credit creation are directly linked to the banking system.
Question 6. If currency held is 300 and deposits in the bank are 400, what is the currency deposit ratio?
  1.    1
  2.    34
  3.    43
  4.    73
 Discuss Question
Answer: Option B. -> 34
:
B
The cdr is 34.
Question 7. The demand for money which arises from not wanting to invest in stocks and bonds fearing capital loss is called:
  1.    Liquidity demand
  2.    Transaction demand
  3.    Speculative demand
  4.    Precautionary demand
 Discuss Question
Answer: Option C. -> Speculative demand
:
C
The demand for money which arises from not wanting to invest in stocks and bonds fearing capital loss is called speculative demand.
Question 8. Which of the following is the most commonly used measure of money supply?
  1.    M1
  2.    M2
  3.    M3
  4.    M4
 Discuss Question
Answer: Option C. -> M3
:
C
M3 is the most commonly used measure of money supply.
Question 9. Central bank is an apex bank of the country that:
  1.    Controls the entire banking system of the country
  2.    Issues currency
  3.    Acts as a banker to the government
  4.    All of these
 Discuss Question
Answer: Option D. -> All of these
:
D
The central bank performs all of these functions.
Question 10. Which of the following is the most liquid measure of money supply?
  1.    M1
  2.    M2
  3.    M3
  4.    M4
 Discuss Question
Answer: Option A. -> M1
:
A
M1 is most liquid.

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