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Tuition Test – Mast. Jitin

1. Which of the following component(s) is/are not included in the money supply?

- Stock of gold with RBI

- Currency with private individuals

- Currency with business firms

- All of these

2. Demand deposits include:

- Saving account deposits and current account deposits

- Saving account deposits and fixed deposits

- Current account deposits and fixed deposits

- All types of deposits

3. Which bank in India is the controller of credit?

- Axis Bank

- State Bank of India

- Reserve Bank of India

- Punjab National Bank

4. Read the following statements carefully:

- Statement 1: Money is defined as anything that is generally accepted as a medium of exchange and
at the same time acts as a measure and a store of value.

- Statement 2: Money supply is the stock of money in circulation in the country at a particular point
of time.

In the light of the given statements, choose the correct alternative from the following:

- Statement 1 is false and statement 2 is true

Statement 1 is true and statement 2 is false

- Both statements 1 and 2 are false

- Both statements 1 and 2 are true

5. Read the following statements carefully:

- Statement 1: Commercial banks are the financial institutions that accept deposits from the public
and advance loans to others.

- Statement 2: Reserve Bank of India is the sole authority for issuing currency notes in India.

In the light of the given statements, choose the correct alternative from the following:

- Statement 1 is false and statement 2 is true

- Statement 1 is true and statement 2 is false

- Both statements 1 and 2 are false

- Both statements 1 and 2 are true

6. Read the following statements-Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:

- Assertion (A): Central bank as a banker to the government works as a custodian of cash reserves.

- Reason (R): The central bank acts as a clearing house for transfer and settlement of mutual claims
of commercial banks.

Alternatives:

- Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of
Assertion (A)

- Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion
(A)

- Assertion (A) is false but Reason (R) is true - Assertion (A) is true but Reason (R) is false

7. Read the following statements-Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:

- Assertion (A): Banks charge a higher interest rate on loans than what they offer on deposits.

Reason (R): The difference between what is charged from borrowers and what is paid to depositors
is the main source of income of the banks.
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Alternatives:

- Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of
Assertion (A)

- Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion
(A)

- Assertion (A) is false but Reason (R) is true - Assertion (A) is true but Reason (R) is false

8. Read the following text carefully and discuss briefly any two tools of correcting the situation of
deflation/recession in the economy.

- The Reserve Bank of India (RBI) cuts Repo Rate to 4.4%, the lowest in at least 15 years. Also, it
reduced the Cash Reserve Ratio (CRR) maintained by the banks for the first time in over seven years.
CRR for all banks was cut by 100 basis points to release ₹1.37 lakh crores across the banking system.
RBI governor Dr. Shaktikanta Das predicted a big global recession and said India will not be immune.
It all depends on how India responds to the situation. Aggregate demand may weaken and ease core
inflation. --The Economic Times; March 27th, 2020

9. Read the following statements-Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:

- Assertion (A): Market price is the difference between factor cost and net subsidies.

- Reason (R): Depreciation is added to net investment to convert into gross investment.

Alternatives:

- Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of
Assertion (A)

- Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion
(A)

- Assertion (A) is false but Reason (R) is true - Assertion (A) is true but Reason (R) is false

10. Read the following statements carefully:

- Statement 1: The value of money multiplier is inverse of Reserve Ratio.

Statement 2: The process of money creation ends when initial deposits get equal to money
creation.

In the light of the given statements, choose the correct alternative from the following:
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- Statement 1 is false and statement 2 is true

- Statement 1 is true and statement 2 is false

- Both statements 1 and 2 are false

- Both statements 1 and 2 are true

11. Read the following statements carefully:

- Statement 1: Domestic product can be more than national product.

- Statement 2: Consumption of fixed capital is added to gross domestic income to obtain national
income.

In the light of the given statements, choose the correct alternative from the following:

- Statement 1 is false and statement 2 is true

- Statement 1 is true and statement 2 is false

- Both statements 1 and 2 are false

- Both statements 1 and 2 are true

12. Read the following statements-Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:

- Assertion (A): All coins are issued by the Ministry of Finance in India.

- Reason (R): All currency notes except ₹1 note are issued by the RBI.

Alternatives:

- Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of
Assertion (A)

- Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion
(A)

- Assertion (A) is false but Reason (R) is true - Assertion (A) is true but Reason (R) is false
13. Read the following text carefully and explain the relevant function of the Central Bank indicated
here.

- The Reserve Bank of India imposed a penalty of ₹25 lakh on Chhattisgarh Rajya Sahakari Bank
Maryadit Raipur for non-compliance with certain provisions of the ‘Reserve Bank of India (Know Your
Customer (KYC)) Directions 2016’. The penalty comes after the statutory inspection of the bank
conducted by NABARD concerning the bank’s financial position as of March 31, 2020. The Inspection
Report pertaining thereto and examination of all related correspondence revealed inter alia that the
bank had failed to put in place a system of periodic review of risk categorization of customers, RBI
said.

14. Which of the following statements is correct?

- Supply of money is a stock concept.

- Supply of money does not include the stock of money held by the government.

- Supply of money includes the stock of money held by the banking system of a country.

- (i) and (iii)

- (i), (ii), and (iii)

- (ii) and (iii)

- (i) and (ii)

15. Bank nurtures the market for government securities in India.

- Central bank

- Commercial banks

- World Bank

- All of these

16. Read the following statements-Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:

- Assertion (A): Banks charge a higher interest rate on loans than what they offer on deposits.

- Reason (R): The difference between what is charged from borrowers and what is paid to depositors
is their main source of income.

Alternatives:

- Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of
Assertion (A)
- Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion
(A)

- Assertion (A) is false but Reason (R) is true - Assertion (A) is true but Reason (R) is false

17. Time Deposits and Demand Deposits are one and the same – Defend or Refute this statement. (4
Marks)

18. Differentiate between Central Bank and Commercial Bank (4 Marks)

19. Fiat Money and High Powered Money – Explain. (4 Marks)

20. Explain the Moral Suasion and Marginal Requirement. (4 Marks)

21. What are the limitations of the Barter System? (4 Marks)

22. Explain in detail the various measures of money supply in

India. (5 Marks)

23. Credit creation process – Elaborately explain. (5 Marks)

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