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Test: Money And Banking - 1 - UPSC MCQ


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10 Questions MCQ Test Indian Economy for UPSC CSE - Test: Money And Banking - 1

Test: Money And Banking - 1 for UPSC 2024 is part of Indian Economy for UPSC CSE preparation. The Test: Money And Banking - 1 questions and answers have been prepared according to the UPSC exam syllabus.The Test: Money And Banking - 1 MCQs are made for UPSC 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Money And Banking - 1 below.
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Test: Money And Banking - 1 - Question 1

Central Bank is a/an

Detailed Solution for Test: Money And Banking - 1 - Question 1

Apex is the top or highest part of something, especially one forming a point.  An apex institution is a second-tier or wholesale organization that channels funding (grants, loans, guarantees) to multiple microfinance institutions (MFIs) in a single country or region. Funding may be provided with or without supporting technical services.

The Central Bank is the Apex Bank in India because of the following functions:

  • Monetary authority, issue of currency. Banker and debt manager to government, banker to banks, regulation of banking system, manager of foreign exchange, regulator and supervisor of the payment and the settlement systems and maintaining financial stability
Test: Money And Banking - 1 - Question 2

Money is a medium of

Detailed Solution for Test: Money And Banking - 1 - Question 2

Money is often defined in terms of the three functions or services that it provides. Money serves as a medium of exchange, as a store of value, and as a unit of account.

Test: Money And Banking - 1 - Question 3

The function of money is that it is a

Detailed Solution for Test: Money And Banking - 1 - Question 3

Well in an easy way to understand this, we can say that  the primary function of money as a store of value is that it can be used to transfer purchasing power from present to future.The main reason behind this is that it is most economical and convenient way to store money as its storage does not require much space. Basically, money as a store of value provides security to individuals.

 

Test: Money And Banking - 1 - Question 4

The most liquid asset among the following is?

Detailed Solution for Test: Money And Banking - 1 - Question 4

Cash is a highly liquid asset followed by the banking accounts, checkable account, short-term promissory notes, treasury bills and other government bonds.

Test: Money And Banking - 1 - Question 5

One of the measures of money supply is

Detailed Solution for Test: Money And Banking - 1 - Question 5

There are several standard measures of the money supply, including the monetary base, M1, and M2. The monetary base is defined as the sum of currency in circulation and reserve balances (deposits held by banks and other depository institutions in their accounts at the Federal Reserve).

Test: Money And Banking - 1 - Question 6

The process of money creation or credit creation is done by

Detailed Solution for Test: Money And Banking - 1 - Question 6

The process of money creation, commercial banks are able to create credit, which is in far excess of the initial deposits.

Test: Money And Banking - 1 - Question 7

Money is anything that is

Detailed Solution for Test: Money And Banking - 1 - Question 7

Money to be used as a medium of exchange must be universally acceptable. All people must accept a thing as money. Or the government should give it legal sanction. And for performing the other two functions—that is, to be used as a store of value and standard of deferred payment—money should have stability of value. In other words, the value of money should not change often.

Test: Money And Banking - 1 - Question 8

Barter system is

Detailed Solution for Test: Money And Banking - 1 - Question 8

The system of exchange where goods or services are directly exchanged for other goods or services without saying a medium of exchange, such as money is known as the Barter system

Test: Money And Banking - 1 - Question 9

One drawback of barter exchange is

Detailed Solution for Test: Money And Banking - 1 - Question 9

The functioning of the barter system requires a double coincidence of wants on the part of those who want to exchange goods or services. It is necessary for a person who wishes to trade his good or service to find some other person who is not only willing to buy his good or service, but also possesses that good which the former wants.

Test: Money And Banking - 1 - Question 10

What do you mean by credit creation by commercial banks?

Detailed Solution for Test: Money And Banking - 1 - Question 10

The most important function of a commercial bank is the creation of credit.
Therefore, money supplied by commercial banks is called credit money. Commercial banks create credit by advancing loans and purchasing securities. They lend money to individuals and businesses out of deposits accepted from the public.

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