Test: Money & Credit- 1

10 Questions MCQ Test Indian Economy for UPSC CSE | Test: Money & Credit- 1

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Barter system is based on


The coincidence of wants (often known as double coincidence of wants) is an economic phenomenon where two parties, each hold an item the other wants, so they exchange these items directly without any monetary medium. 


Assertion : Barter system has limitation of double coincidence of wants.
Reason: Money removes the problem of double coincidence of wants.


We know that in barter system there is a coincident to get a person who want a thing in exchange of what whereas the modern form of money is required by all for the simple exchange between two peoples done for the goods and money as money is required by all for getting goods what they want in exchange of money ,money plays an important role to remove that double coincidence of want such as in barter system.


Which one of the following statements is most appropriate regarding transaction made in money?


Transactions made in money is the easiest way as it doesn't involve double coincidence of wants.


Money is a measure of


Money serves four basic functions: it is a unit of account, it's a store of value, it is a medium of exchange and finally, it is a standard of deferred payment.We consider money as a measure of currency. 


Assertion: Money act as a medium of exchange.
Reason: Law legalizes the use of money as a medium of exchange. 


Money helps to facilitate trade because people in the economy generally recognize it as valuable. Money is called medium of exchange because money is a widely accepted token that can be used for exchange of any good or service and law legalizes the use of money as a medium of exchange so this is the correct reason.


Which one of the following is a modern form of currency?


Modern forms of money include currency — paper notes and coins.


A substitute of cash and cheque is


There are many substitute to cash and cheques. Credit card: Cash paid to the bank after using it in advance through credit card. Debit Cards: Prepaid card used to transfer money but to limited amount with very low fees and reliable way.


Assertion: Demand Deposits in the bank are a form of money.
Reason: People have the provision to withdraw them as and when required.


As Demand Deposits in the bank are in form of money and yes people have the provision to withdraw the amount when required hence the reason is correct for the assertion.


Which among the following authorities issues currency notes on behalf of the government?


The Reserve Bank Of India (RBI) issues currency notes on behalf of the central govt.


Assertion: The modern currency is without any use of its own.
Reason: Money in India is printed and circulated by RBI.


The modern currency is without any use of its own because it is not made of precious metals such as gold or silver but included paper notes or coins. It is actually used as a medium of exchange in order to buy or sell something. so reason given is incorrect that Money in India is printed and circulated by RBI.

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