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Test Questions:

1. Define money and explain its functions.
- Money is a medium of exchange that is widely accepted in transactions.
- Functions of money include:
- Medium of exchange: Money allows goods and services to be exchanged for other goods and services.
- Unit of account: Money provides a common measure of value for goods and services.
- Store of value: Money can be saved and used in the future as a purchasing power.
- Standard of deferred payment: Money is used to settle debts and make payments in the future.

2. Differentiate between metallic and paper money.
- Metallic money refers to coins made of metal, such as gold, silver, or copper.
- Paper money, on the other hand, is made of paper and issued by the central bank of a country.
- While metallic money has intrinsic value due to the metal it is made of, paper money has no intrinsic value and derives its value from the trust and confidence people have in it.

3. Explain the role of the Reserve Bank of India (RBI) in controlling credit creation.
- The RBI is the central bank of India and has the authority to control credit creation in the country.
- It does this by implementing various monetary policy measures, such as changing the repo rate, cash reserve ratio (CRR), and statutory liquidity ratio (SLR).
- By increasing the repo rate, the RBI can reduce the availability of credit and control inflation.
- Similarly, by changing the CRR and SLR, the RBI can influence the lending capacity of commercial banks and regulate the credit flow in the economy.

4. Discuss the advantages and disadvantages of credit.
- Advantages of credit include:
- It allows people to make purchases and fulfill their needs even when they don't have enough money.
- It promotes economic growth and supports business activities.
- It provides flexibility in managing finances and enables investments.
- Disadvantages of credit include:
- It can lead to overindebtedness and financial instability if not managed responsibly.
- High interest rates on credit can increase the cost of borrowing.
- Failure to repay credit can result in legal consequences and damage creditworthiness.

Conclusion:
The test focused on assessing the students' understanding of money and credit. By answering the questions, students were able to demonstrate their knowledge regarding the functions of money, differences between metallic and paper money, the role of the RBI in controlling credit creation, and the advantages and disadvantages of credit.

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