Chapter 5: Money and Economy - MCQs

1. Match the function of money with its description and a suitable example:

Column A (Function)	Column B (Description)	Column C (Example)
1. Medium of Exchange	(a) Allows current consumption to be deferred	(i) Saving money for a child's education
2. Store of Value	(b) Facilitates buying and selling without direct barter	(ii) Buying groceries with cash
3. Means of Deferred Payments	(c) Enables future transactions and debt settlement	(iii) Taking a loan for a car and paying it back monthly

Select the correct matching combination for each (e.g., for 1, enter 'b' and 'ii'):

1 (Col B, Col C):

2 (Col B, Col C):

3 (Col B, Col C):

2. Assertion (A): The Reserve Bank of India is the sole authority for printing and issuing all currency notes and coins in India.
Reason (R): RBI functions as the Government's Bank and is the custodian of foreign exchange reserves.

Both A and R are true, and R is the correct explanation of A. Both A and R are true, but R is not the correct explanation of A. A is true, but R is false. A is false, but R is true.

3. Arrange the following events in chronological order from earliest to latest:

1. Establishment of RBI
2. Nationalisation of RBI
3. Implementation of Jan Dhan Account scheme

I, II, III II, I, III I, III, II III, I, II

4. Which of the following statements correctly compares formal and informal sources of credit?

Formal sources are generally unorganised, while informal sources are regulated. Formal sources typically offer lower interest rates than informal sources. Informal sources require collateral, whereas formal sources do not. Self-Help Groups (SHGs) are examples of informal sources, while local money lenders are formal.

5. Why does the Reserve Bank of India (RBI) increase the Repo Rate to control inflation?

To encourage commercial banks to borrow more, increasing money supply. To reduce the amount of money commercial banks keep as reserves. To make borrowing more expensive for commercial banks, thereby reducing their lending capacity and decreasing money supply. To increase the interest commercial banks earn on their deposits with RBI.

6. Consider the following statements about financial institutions:

1. Commercial banks provide an overdraft facility primarily for Savings Deposit accounts.
2. Non-Banking Financial Institutions (NBFIs) cannot accept savings deposits.
3. Cooperative banks are typically owned by members and activate the rural economy.

Which of the statements given above is/are correct?

I and II only II and III only I and III only I, II and III

7. The primary objective of the government's initiatives towards 'Financial Inclusion' is to:

Promote digital currency exclusively. Nationalize all private banks. Extend banking services and financial benefits to all segments of society, especially the unbanked. Increase the Credit Deposit Ratio of commercial banks.

8. What does 'Velocity of Circulation' in the context of money refer to?

The speed at which money is printed by the RBI. The rate at which the value of money depreciates. The number of times a unit of money is exchanged in a given period. The total amount of money circulating in the economy.

9. The Reserve Bank of India (RBI) is the sole authority for printing and issuing all currencies in India, EXCEPT:

Ten-rupee notes Coins and one-rupee notes Fifty-rupee notes Two thousand-rupee notes

10. Match the type of deposit with its key feature and a suitable description:

Column A (Deposit Type)	Column B (Key Feature)	Column C (Description)
1. Savings Deposit	(a) Overdraft facility	(i) Suited for businesses with frequent transactions
2. Current Deposit	(b) Fixed period for higher interest	(ii) Allows accumulation of savings with some liquidity
3. Term/Fixed Deposit	(c) Flexible withdrawals, low interest	(iii) Best for long-term savings with no immediate withdrawal needs

Select the correct matching combination for each (e.g., for 1, enter 'c' and 'ii'):

1 (Col B, Col C):

2 (Col B, Col C):

3 (Col B, Col C):