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Test: Money and Banking- Case Based Type Questions - Commerce MCQ


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10 Questions MCQ Test Economics Class 12 - Test: Money and Banking- Case Based Type Questions

Test: Money and Banking- Case Based Type Questions for Commerce 2024 is part of Economics Class 12 preparation. The Test: Money and Banking- Case Based Type Questions questions and answers have been prepared according to the Commerce exam syllabus.The Test: Money and Banking- Case Based Type Questions MCQs are made for Commerce 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Money and Banking- Case Based Type Questions below.
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Test: Money and Banking- Case Based Type Questions - Question 1

Read the following case study paragraph carefully and answer the question based on the same.

The central bank of India i.e. Reserve Bank of India is the apex institution that controls the entire financial market. It’s one of the major functions is to maintain the reserve of foreign exchange. Also, it intervenes in the foreign exchange market to stabilize the excessive fluctuation in the foreign exchange rate.

In other words, it is the central bank’s job to control a country’s economy through monetary policy; if the economy is moving slowly or going backward, there are steps that the central bank can take to boost the economy. These steps, whether they are asset purchases or printing more money, all involve injecting more cash into the economy. The simple supply and demand economic projection occurs and currency will devalue.

When the opposite occurs, and the economy is growing, the central bank will use various methods to keep that growth steady and in-line with other economic factors such as wages and prices. Whatever the central bank does or doesn’t do, will affect the currency of that country. Sometimes, it is within the central bank’s interest to purposefully affect the value of a currency. For example, if the economy is heavily reliant on exports and their currency value becomes too high, importers of that country’s commodities will seek cheaper supply; hence directly affecting the economy.

Q. Which of the following steps should be taken by the central bank if there is an excessive rise in the foreign exchange rate?

Detailed Solution for Test: Money and Banking- Case Based Type Questions - Question 1
As regards control on rise in the price of the foreign exchange, Central Bank will increase the Bank role. It will attract foreign Direct Investment, that will increase the flow of foreign exchange and it will automatically control the price of foreign exchange. Simultaneously, it will increase the job potentials due to induction of MNCs and common man will be benefitted.
Test: Money and Banking- Case Based Type Questions - Question 2

Read the following case study paragraph carefully and answer the question based on the same.

The central bank of India i.e. Reserve Bank of India is the apex institution that controls the entire financial market. It’s one of the major functions is to maintain the reserve of foreign exchange. Also, it intervenes in the foreign exchange market to stabilize the excessive fluctuation in the foreign exchange rate.

In other words, it is the central bank’s job to control a country’s economy through monetary policy; if the economy is moving slowly or going backward, there are steps that the central bank can take to boost the economy. These steps, whether they are asset purchases or printing more money, all involve injecting more cash into the economy. The simple supply and demand economic projection occurs and currency will devalue.

When the opposite occurs, and the economy is growing, the central bank will use various methods to keep that growth steady and in-line with other economic factors such as wages and prices. Whatever the central bank does or doesn’t do, will affect the currency of that country. Sometimes, it is within the central bank’s interest to purposefully affect the value of a currency. For example, if the economy is heavily reliant on exports and their currency value becomes too high, importers of that country’s commodities will seek cheaper supply; hence directly affecting the economy.

Q. Which of the following tools are used by the central bank to control the flow of money in the domestic economy?

Detailed Solution for Test: Money and Banking- Case Based Type Questions - Question 2
The quantitative instruments are also known as general tools used by the RBI (Reserve Bank of India). As the name suggests, these instruments are related to the quantity and volume of the money. These instruments are designed to control the total volume/money of the bank credit in the economy. These instruments are indirect in their nature and are used to influence the quantity of credit in the economy.
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Test: Money and Banking- Case Based Type Questions - Question 3

Read the following case study paragraph carefully and answer the question based on the same.

The central bank of India i.e. Reserve Bank of India is the apex institution that controls the entire financial market. It’s one of the major functions is to maintain the reserve of foreign exchange. Also, it intervenes in the foreign exchange market to stabilize the excessive fluctuation in the foreign exchange rate.

In other words, it is the central bank’s job to control a country’s economy through monetary policy; if the economy is moving slowly or going backward, there are steps that the central bank can take to boost the economy. These steps, whether they are asset purchases or printing more money, all involve injecting more cash into the economy. The simple supply and demand economic projection occurs and currency will devalue.

When the opposite occurs, and the economy is growing, the central bank will use various methods to keep that growth steady and in-line with other economic factors such as wages and prices. Whatever the central bank does or doesn’t do, will affect the currency of that country. Sometimes, it is within the central bank’s interest to purposefully affect the value of a currency. For example, if the economy is heavily reliant on exports and their currency value becomes too high, importers of that country’s commodities will seek cheaper supply; hence directly affecting the economy.

Q. Dear money policy of the central bank, which is used to keep the growth steady and in-line with other economic factors, refers to

Detailed Solution for Test: Money and Banking- Case Based Type Questions - Question 3
Dear money policy refers to a monetary policy by the central bank where the central bank sets high interest rates so that credit is not easily available to the general public in order to decrease the real income and hence purchasing power of the people. Such a policy is used by the government at the time of inflation in the economy.
Test: Money and Banking- Case Based Type Questions - Question 4

Read the below case and answer the question that follow:

On March 5, 2020, the Reserve Bank of India (RBI) imposed a 30-day moratorium on YES Bank, superseded the private-sector lender’s board, and appointed Prashant Kumar, who was serving as chief financial officer and deputy managing director at State Bank of India (SBI), as an administrator. Under the terms of the moratorium, deposit withdrawals were capped at ₹50,000 per person. The central bank proposed a reconstruction scheme under which SBI might take a maximum of 49% stake in the restructured capital of the bank. Analysts believed the new management of YES Bank, headed by former Deutsche Bank India head Ravneet Gill, who joined the bank in early 2019, could turn around the ship. Gill, however, has struggled to do so.

The bank’s loan book on March 31, 2014, was ₹55,633 crore, and its deposits were ₹74,192 crore. Since then, the loan book has grown to nearly four times as much, at ₹ 2.25 trillion as on September 30, 2019. While deposit growth failed to keep pace and increased at less than three times to ₹2.10 trillion. The bank’s asset quality also worsened and it came under regulator RBI’s scanner. YES Bank has a substantial exposure to several troubled borrowers, including the Anil Ambani-led Reliance group, DHFL and IL&FS. The tipping point came when one of the bank’s independent directors, Uttam Prakash Agarwal, resigned from the board in January 2020 citing governance issues. - “What is YES Bank Crisis?” - Business Standard

Q. Read the following statements - Assertion (A) and Reason (R).

Assertion (A): YES Bank put into the check of the RBI.

Reason (R): The loan book has grown nearly four times and deposits failed to grow. Select the correct alternative from the following:

Detailed Solution for Test: Money and Banking- Case Based Type Questions - Question 4
The loan book has grown to nearly four times as much, at ₹2.25 trillion as on September 30, 2019. While deposit growth failed to keep pace and increased at less than three times to ₹2.10 trillion.
Test: Money and Banking- Case Based Type Questions - Question 5

Read the below case and answer the question that follow:

On March 5, 2020, the Reserve Bank of India (RBI) imposed a 30-day moratorium on YES Bank, superseded the private-sector lender’s board, and appointed Prashant Kumar, who was serving as chief financial officer and deputy managing director at State Bank of India (SBI), as an administrator. Under the terms of the moratorium, deposit withdrawals were capped at ₹50,000 per person. The central bank proposed a reconstruction scheme under which SBI might take a maximum of 49% stake in the restructured capital of the bank. Analysts believed the new management of YES Bank, headed by former Deutsche Bank India head Ravneet Gill, who joined the bank in early 2019, could turn around the ship. Gill, however, has struggled to do so.

The bank’s loan book on March 31, 2014, was ₹55,633 crore, and its deposits were ₹74,192 crore. Since then, the loan book has grown to nearly four times as much, at ₹ 2.25 trillion as on September 30, 2019. While deposit growth failed to keep pace and increased at less than three times to ₹2.10 trillion. The bank’s asset quality also worsened and it came under regulator RBI’s scanner. YES Bank has a substantial exposure to several troubled borrowers, including the Anil Ambani-led Reliance group, DHFL and IL&FS. The tipping point came when one of the bank’s independent directors, Uttam Prakash Agarwal, resigned from the board in January 2020 citing governance issues. - “What is YES Bank Crisis?” - Business Standard

Q. Which of the following functions has been performed by the RBI in the above case study?

Test: Money and Banking- Case Based Type Questions - Question 6

Read the below case and answer the question that follow:

On March 5, 2020, the Reserve Bank of India (RBI) imposed a 30-day moratorium on YES Bank, superseded the private-sector lender’s board, and appointed Prashant Kumar, who was serving as chief financial officer and deputy managing director at State Bank of India (SBI), as an administrator. Under the terms of the moratorium, deposit withdrawals were capped at ₹50,000 per person. The central bank proposed a reconstruction scheme under which SBI might take a maximum of 49% stake in the restructured capital of the bank. Analysts believed the new management of YES Bank, headed by former Deutsche Bank India head Ravneet Gill, who joined the bank in early 2019, could turn around the ship. Gill, however, has struggled to do so.

The bank’s loan book on March 31, 2014, was ₹55,633 crore, and its deposits were ₹74,192 crore. Since then, the loan book has grown to nearly four times as much, at ₹ 2.25 trillion as on September 30, 2019. While deposit growth failed to keep pace and increased at less than three times to ₹2.10 trillion. The bank’s asset quality also worsened and it came under regulator RBI’s scanner. YES Bank has a substantial exposure to several troubled borrowers, including the Anil Ambani-led Reliance group, DHFL and IL&FS. The tipping point came when one of the bank’s independent directors, Uttam Prakash Agarwal, resigned from the board in January 2020 citing governance issues. - “What is YES Bank Crisis?” - Business Standard

Q. What other role does the RBI play for Commercial Banks like YES Bank?

Detailed Solution for Test: Money and Banking- Case Based Type Questions - Question 6
Central Bank, as the Banker ’s bank, accepts deposits from the commercial banks and offers them loans as and when required. As the agent and advisor to the government, it manages public debt on behalf of the government and also advises on policy matters. Central bank control credit creation to remove causes responsible for instability in price fluctuations which inturn are related to the supply of money.
Test: Money and Banking- Case Based Type Questions - Question 7

Read the below case and answer the question that follow:

On March 5, 2020, the Reserve Bank of India (RBI) imposed a 30-day moratorium on YES Bank, superseded the private-sector lender’s board, and appointed Prashant Kumar, who was serving as chief financial officer and deputy managing director at State Bank of India (SBI), as an administrator. Under the terms of the moratorium, deposit withdrawals were capped at ₹50,000 per person. The central bank proposed a reconstruction scheme under which SBI might take a maximum of 49% stake in the restructured capital of the bank. Analysts believed the new management of YES Bank, headed by former Deutsche Bank India head Ravneet Gill, who joined the bank in early 2019, could turn around the ship. Gill, however, has struggled to do so.

The bank’s loan book on March 31, 2014, was ₹55,633 crore, and its deposits were ₹74,192 crore. Since then, the loan book has grown to nearly four times as much, at ₹ 2.25 trillion as on September 30, 2019. While deposit growth failed to keep pace and increased at less than three times to ₹2.10 trillion. The bank’s asset quality also worsened and it came under regulator RBI’s scanner. YES Bank has a substantial exposure to several troubled borrowers, including the Anil Ambani-led Reliance group, DHFL and IL&FS. The tipping point came when one of the bank’s independent directors, Uttam Prakash Agarwal, resigned from the board in January 2020 citing governance issues. - “What is YES Bank Crisis?” - Business Standard

Q. Under the moratorium, the deposit withdrawal was capped at _______________.

Detailed Solution for Test: Money and Banking- Case Based Type Questions - Question 7
The government has put private sector lender Yes Bank under moratorium till April 3 and capped deposit withdrawal at ₹50,000 after severe deterioration of the bank’s financial position. The decision was taken by the government after an application from Reserve Bank of India (RBI), a Gazette notification said.
Test: Money and Banking- Case Based Type Questions - Question 8

Read the below case and answer the question that follow:

In a 40-minute long speech Prime Minister Narendra Modi announced the demonetisation of existing notes of ₹ 500 and ₹ 1,000 during a televised address on Tuesday evening.

Modi announced that the notes of ₹ 500 and ₹ 1,000 will not be legal tender from midnight tonight and these will be “just worthless pieces of paper''. The PM also urged people to ‘join this mahayojna against the ills of corruption.

Q. ______________ is issued by the government of India.

Detailed Solution for Test: Money and Banking- Case Based Type Questions - Question 8
It is the sole responsibility of the Government of India to mint coins of all denominations.
Test: Money and Banking- Case Based Type Questions - Question 9

Read the below case and answer the question that follow:

In a 40-minute long speech Prime Minister Narendra Modi announced the demonetisation of existing notes of ₹ 500 and ₹ 1,000 during a televised address on Tuesday evening.

Modi announced that the notes of ₹ 500 and ₹ 1,000 will not be legal tender from midnight tonight and these will be “just worthless pieces of paper''. The PM also urged people to ‘join this mahayojna against the ills of corruption.

Q. Under whose purview does the issue of new currency fall in?

Detailed Solution for Test: Money and Banking- Case Based Type Questions - Question 9
The Central Bank plays the role of the sole note issuing authority in the economy.
Test: Money and Banking- Case Based Type Questions - Question 10

Read the below case and answer the question that follow:

In a 40-minute long speech Prime Minister Narendra Modi announced the demonetisation of existing notes of ₹ 500 and ₹ 1,000 during a televised address on Tuesday evening.

Modi announced that the notes of ₹ 500 and ₹ 1,000 will not be legal tender from midnight tonight and these will be “just worthless pieces of paper''. The PM also urged people to ‘join this mahayojna against the ills of corruption.

Q. ₹1 currency note is issued by ______________.

Detailed Solution for Test: Money and Banking- Case Based Type Questions - Question 10
The one rupee note and coins are issued by the ministry of finance and it bears the signature of the Finance Secretary.
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