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B Com Exam  >  B Com Tests  >  Test: Introduction to Indian Financial System-2 - B Com MCQ

Test: Introduction to Indian Financial System-2 - B Com MCQ


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10 Questions MCQ Test - Test: Introduction to Indian Financial System-2

Test: Introduction to Indian Financial System-2 for B Com 2024 is part of B Com preparation. The Test: Introduction to Indian Financial System-2 questions and answers have been prepared according to the B Com exam syllabus.The Test: Introduction to Indian Financial System-2 MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Introduction to Indian Financial System-2 below.
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Test: Introduction to Indian Financial System-2 - Question 1
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What is the term for the total sum of money available to the public in an economy at a specific point in time?

Detailed Solution for Test: Introduction to Indian Financial System-2 - Question 1
Money supply refers to the total stock of monetary media of exchange available for use by the public in an economy at a specific time. It encompasses both currency and demand deposits.
Test: Introduction to Indian Financial System-2 - Question 2
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What is the primary function of money supply in an economy?

Detailed Solution for Test: Introduction to Indian Financial System-2 - Question 2
Money supply serves as a crucial factor for achieving balanced economic growth by facilitating transactions, investments, and overall economic activities. It helps in maintaining stability and preventing both inflation and deflation.
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Test: Introduction to Indian Financial System-2 - Question 3
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Which component of money supply represents the total amount of currency notes in circulation issued by the central bank?

Detailed Solution for Test: Introduction to Indian Financial System-2 - Question 3
Currency with the public includes currency notes in circulation issued by the central bank, along with other forms of money in the hands of the public.
Test: Introduction to Indian Financial System-2 - Question 4
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What is the primary reason for distinguishing various measures of money supply based on their functions?
Detailed Solution for Test: Introduction to Indian Financial System-2 - Question 4
Distinguishing measures of money supply based on their functions helps in predicting the effects of changes in different components on the economy, aiding in effective monetary policy decisions.
Test: Introduction to Indian Financial System-2 - Question 5
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What is the term used to describe the degree to which money supply expands in response to an increase in high-powered money?
Detailed Solution for Test: Introduction to Indian Financial System-2 - Question 5
The money multiplier is the measure of how much the money supply expands for a given increase in high-powered money. It depends on the cash reserve ratio of banks and the currency-deposit ratio of the public.
Test: Introduction to Indian Financial System-2 - Question 6
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Which concept of money supply includes savings deposits with the post office savings banks?
Detailed Solution for Test: Introduction to Indian Financial System-2 - Question 6
Money Supply M2 includes savings deposits with the post office savings banks, in addition to the components of Money Supply M1.
Test: Introduction to Indian Financial System-2 - Question 7
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What role does the high-powered money (H) play in determining money supply?
Detailed Solution for Test: Introduction to Indian Financial System-2 - Question 7
High-powered money (H) influences the total money supply indirectly through its relationship with the money multiplier and the cash reserve ratio.
Test: Introduction to Indian Financial System-2 - Question 8
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How does the drainage of currency to the public during the deposit creation process affect the money multiplier?
Detailed Solution for Test: Introduction to Indian Financial System-2 - Question 8
The drainage of currency from banks to the public during the deposit creation process reduces the value of the money multiplier, as it decreases the extent of expansion in demand deposits.
Test: Introduction to Indian Financial System-2 - Question 9
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What is the main determinant of the deposit multiplier?
Detailed Solution for Test: Introduction to Indian Financial System-2 - Question 9
The cash reserve ratio (r) of banks determines the magnitude of the deposit multiplier, which indicates how much total deposits expand for a given increase in cash reserves.
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Test: Introduction to Indian Financial System-2 - Question 10
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What determines the size of the money multiplier in an economy?
Detailed Solution for Test: Introduction to Indian Financial System-2 - Question 10

The size of the money multiplier is determined by both the cash reserve ratio (r) of banks and the currency-deposit ratio (k) of the public. It reflects how much total money supply expands for a given increase in high-powered money.

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