Money and banking are essential components of modern economies, playing a crucial role in facilitating economic transactions and influencing overall financial stability.
Money and Banking MCQs Practice Now
Here is a short note on these two interconnected concepts:
- Money:
- Medium of Exchange: Money serves as a widely accepted medium of exchange that simplifies trade by eliminating the need for barter systems. It allows people to buy and sell goods and services more efficiently.
- Unit of Account: Money provides a standard unit of measurement for pricing and comparing the value of various goods and services. This makes economic calculations and financial planning easier.
- Store of Value: Money can be stored for future use. It retains its value over time, enabling individuals to save and defer consumption. However, factors like inflation can erode its value over extended periods.
- Standard of Deferred Payment: Money allows people to enter into contracts that involve future payments, such as loans and mortgages.
- Banking:
- Financial Intermediation: Banks serve as intermediaries between savers and borrowers. They accept deposits from individuals and entities and then lend these funds to individuals, businesses, or governments in the form of loans or investments.
- Payment System: Banks facilitate the transfer of money through various means, such as checks, debit/credit cards, electronic funds transfers, and mobile banking. These services enhance the efficiency and security of financial transactions.
- Credit Creation: Banks can create money through the process of fractional reserve banking. When individuals deposit money in banks, a portion of it is held in reserve, while the rest is lent out. This enables the expansion of the money supply and contributes to economic growth.
- Financial Stability: Banking institutions are crucial for the stability of the financial system. Regulatory authorities oversee banks to ensure their solvency and to prevent financial crises.
Money and Banking MCQs
Q1. Which committee has been constituted by the Government of India to boost cashless transactions?
(a) Nachiket More Committee
(b) Shanta Kumar Committee
(c) H.R. Khan Committee
(d) Neeraj Kumar Gupta Committee
Q2. Which one of the following links all the ATMs in India?
(a) Indian Banks Association
(b) National Securities Depository Limited (c) National Payments Corporation of India
(d) Reserve Bank of India
Q3. The money multiplier in an economy increases with which one of the following?
(a) Increase in the Cash Reserve Ratio in the banks
(b) Increase in the Statutory Liquidity Ratio in the banks
(c) Increase in the banking habit of the people
(d) Increase in the population of the country
Q4. What is black money?
(a) It is an illegal currency
(b) It is a Fake currency
(c) It is dirty/bad money
(d) It is an illegal income upon which income tax is not paid
Q5. Which of the following was not the stated objective of demonetization in India?
(a) Reduction in the use of cash in the economy
(b) Increasing in the use of digital modes of transaction
(c) Expanding the tax base
(d) Increasing the growth rate of G.D.P
Q6. Paper currency was first started in India in :
(a) 1862
(b) 1542
(c) 1601
(d) 1880
Q7. When did the ‘Naya paisa’ introduced with the decimal system of coinage become, paisa ?
(a) April 1, 1957
(b) April 1, 1965
(c) June 1, 1964
(d) October 2, 1961
Q8. In India ‘Currency Notes issue system’ is based on :
(a) Proportional reserve system
(b) Minimum reserve system
(c) Fixed exchange rate system
(d) Full convertibility system
Q9. Reserve Bank of India issues currency notes against which of the following?
(a) Gold
(b) Foreign security
(c) Govt. of India security
(d) All of the above
Q10. Who is authorized to issue coins in India ?
(a) Reserve Bank of India
(b) Ministry of Finance
(c) State Bank of India
(d) National Stock Market
Q11. Due to inflation :
(a) Prices of goods increase
(b) The value of money falls
(c) The exchange rate improves
(d) Above (a) and (b)
Q12. Inflation is beneficial to which of the following sections of the economy?
(a) Creditors
(b) Investors in bonds and securities
(c) Debtors
(d) Consumers
Q13. Core inflation is defined as :
(a) Headline inflation excluding only fuel inflation
(b) Food inflation and fuel inflation
(c) Headline inflation excluding only food inflation
(d) Headline inflation excluding both food inflation and fuel inflation
Q14. The most common measure of estimating inflation in India is :
(a) Price Index
(b) Wholesale Price Index
(c) Consumer Price Index
(d) Price Index of Industrial Goods
Q15. The Government of India has nationalized 14 banks of the country in :
(a) July, 1969
(b) August, 1971
(c) March, 1981
(d) July, 1991
Q16. When was the State Bank of India established?
(a) 1954
(b) 1955
(c) 1956
(d) 1957
Q17. The largest commercial bank of India is :
(a) NABARD
(b) State Bank of India
(c) ICICI
(d) Union Bank of India
Q18. Which Indian commercial bank started the first ever moving ATM Services?
(a) ICICI
(b) IDBI
(c) H.D.F.C
(d) S.B.I
Q19. Which private sector bank has launched ‘e-Kisaan Dhan’
app for farmers?
(a) Axis Bank
(b) HDFC Bank
(c) IDBI Bank
(d) Kotak Mahindra Bank
Q20. The Head Office of Small Industries Development Bank of India (SIDBI) is located at :
(a) Ghaziabad
(b) Lucknow
(c) Kanpur
(d) New Delhi
Q21. Which of the following committees has given its recommendations on ‘financial inclusion’?
(a) Rakesh Mohan Committee
(b) Sinha Committee
(c) Rangarajan Committee
(d) Kelkar Committee
Q22. What is ‘Shadow Banking’?
(a) Outsourcing of banking work by a bank (b) Financial transactions and other activities of non banking financial intermediary
(c) Domestic banks’ foreign operations
(d) Foreign bank operating in another country for banking and other activities
Q23. Which among the following is an asset for a Commercial Bank?
(a) Credit to farmers
(b) Deposit of public
(c) Borrowings from R.B.I.
(d) Demand deposits of Industries
Q24. Which of the following is not included in the assets of a commercial bank in India?
(a) Advances
(b) Deposits
(c) Investments
(d) Money at call and short notice
Q25. Basel II relates to which one of the following?
(a) International standard for safety in civil aviation
(b) Measures against cyber crimes
(c) Measures against drug abuse by sportspersons
(d) International standards for measuring the adequacy of a bank’s capital
Q26. Who is the Fiscal agent and advisor to the Government in monetary and financial matters?
(a) NABARD
(b) S.B.I.
(c) R.B.I.
(d) None of the above
Q27. Treasury bills are sold in India by :
(a) Reserve Bank of India
(b) State Governments
(c) Commercial Banks
(d) SEBI
Q28. Which one of the following statements is not correct?
(a) RBI is the Central Bank of the country
(b) RBI is the banker of the Central and the State Governments
(c) RBI is the custodian of the country’s Foreign Exchange Reserve
(d) RBI was established in 1949
Q29. Where is the headquarters of RBI located?
(a) Delhi
(b) Kolkata
(c) Mumbai
(d) Chennai
Q30. When was the Reserve Bank of India established ?
(a) 1920
(b) 1930
(c) 1935
(d) 1940
Q31. Who maintains the foreign exchange reserves in India ?
(a) Reserve Bank of India
(b) State Bank of India
(c) Ministry of Finance, Government of India
(d) Export-Import Bank of India
Q32. In Indian currency, the one rupee note is issued under the signature of :
(a) Governor of Reserve Bank of India
(b) President of India
(c) Finance Secretary, Ministry of Finance, Govt. of India
(d) Finance Minister, Govt. of India
Q33. Monetary Policy is :
(a) Opposed to fiscal policy
(b) Complementary to fiscal policy
(c) More effective during depression (d) Direct measure to control effective demand
Q34. Which one of the following is not an objective of Monetary Policy ?
(a) Price Stability
(b) Economic Stability
(c) Equitable Distribution of Income and Assets
(d) Foreign Exchange Rate Stability
Q35. In India ‘Money and Credit’ is controlled by the :
(a) Central Bank of India
(b) Industrial Development Bank of India
(c) Reserve Bank of India
(d) State Bank of India
Q36. Open market operations are included in :
(a) Qualitative techniques of credit control
(b) Quantitative techniques of credit control
(c) Fiscal policy control
(d) Labour policy control
Q37. Open market operations of Reserve Bank of India refer to :
(a) trading in securities
(b) auctioning of foreign exchange (c) transaction in gold
(d) none of the above
Q38. When RBI announced an increase in Cash Reserve Ratio (CRR) then what does it mean?
(a) The Union Government will have less money to lend
(b) The RBI will have less money to lend
(c) The commercial bank will have less money to lend
(d) All of the above
(e) None of these
Q39. The rate of interest at which Reserve Bank of India lends short term funds to the Commercial Banks is known as :
(a) Repo Rate
(b) Reverse Repo Rate
(c) Prime Lending Rate (PLR)
(d) None of the above
Q40. The rate at which banks lend to Reserve Bank of India is known as :
(a) Bank Rate
(b) Repo Rate
(c) Reverse Repo Rate
(d) Interest Rate
Q41. The lowering of Bank Rate by the Reserve Bank of India leads to :
(a) more liquidity in the market
(b) less liquidity in the market
(c) no change in the liquidity in the market
(d) mobilization of more deposits by Commercial Banks
Q42. Bank rate means :
(a) Interest rate charge by moneylenders
(b) Interest rate charged by Scheduled Banks
(c) Rate of profit of banking institution
(d) Official rate of interest charged by Central Bank
Q43. Who amongst the following is the present Governor of the RBI?
(a) Shaktikanta Das
(b) Arvind Subramanian
(c) Raghuram Rajan
(d) Urjit Patel
Q44. Which among the following agencies regulate mutual funds in India ?
(a) SEBI
(b) National Stock Exchange
(c) Reserve Bank of India
(d) Indian Bank Association
Q45. Which of the following controls the working of the share market in India ?
(a) FEMA
(b) SEBI
(c) MRTP Act
(d) None of the above
Q46. ‘SENSEX’ is the popular Index of Bombay Stock Exchange (BSE). It is measured on the basis of how many blue chip companies listed in BSE?
(a) 20
(b) 30
(c) 25
(d) 10
Q47. Insider trading is related to :
(a) Horse racing
(b) Taxation
(c) Public expenditure
(d) Share market
Q48. The most volatile part of the Organized Money Market in India is :
(a) Government Security Market
(b) Commercial Bill Market
(c) Call Money Market
(d) Certificate of Deposit Market
Q49. Which of the following is related to the Brent Index?
(a) Crude oil prices
(b) Copper future prices
(c) Gold future prices
(d) Shipping rate index
Q50. The apex bank for providing agricultural refinance in India is :
(a) RBI
(b) NABARD
(c) SBI
(d) Imperial Bank
Q51. The Phillips Curve represents relationship between :
(a) Deflation and Unemployment
(b) Inflation and Unemployment
(c) Inflation and Disguised Unemployment
(d) Deflation and Cyclical Unemployment
Q52. Narasimham Committee was related to :
(a) Higher Education Reforms
(b) Tax Structure Reforms
(c) Banking Structure Reforms
(d) Planning implementation reforms
Q53. The Apex bank of agriculture sector is :
(a) Punjab National Bank
(b) State Bank of India
(c) NABARD
(d) Central Bank of India
Q54.NABARD came into existence in the year :
(a) 1979
(b) 1980
(c) 1981
(d) 1982
Q55. Which of the following is the Headquarter of NABARD?
(a) New Delhi
(b) Chennai
(c) Mumbai
(d) Jaipur
Q56. When the total product remains constant, the marginal product will be :
(a) Zero
(b) Negative
(c) Positive
(d) Constant
Q57. A consumer is said to be in equilibrium, if :
(a) he is able to fulfil his need with a given level of income
(b) he is able to live in full comforts with a given level of income
(c) he can fulfil his needs without consumption of certain items
(d) he is able to locate new sources of income
Q58. With fixed demand and increase in supply, the price of the commodity is likely to :
(a) remain constant
(b) increase
(c) decrease
(d) no definite pattern can be predicted
What is the difference between currency and money?
Answer: Currency refers to physical forms of money like coins and paper bills. Money, on the other hand, includes both physical currency and digital representations of value used for transactions, such as bank deposits and electronic funds.
How do banks create money?
Answer: Banks create money through a process called fractional reserve banking. When you deposit money in a bank, a fraction of it is held in reserve, while the rest can be lent out to borrowers. This lending expands the money supply because the borrower’s account now also holds that money, effectively creating more money in circulation.
What is the role of central banks in the banking system?
Answer: Central banks, like the Federal Reserve in the United States or the European Central Bank, are responsible for regulating and supervising the banking system. They also control the money supply, set interest rates, and act as the lender of last resort to provide stability in the financial system.
What is the significance of a bank’s interest rate?
Answer: A bank’s interest rate, often referred to as the “prime rate,” influences the cost of borrowing for individuals and businesses. It also affects the interest earned on savings and investments. Changes in interest rates by central banks can impact economic activity, including spending and investment.
How does online banking differ from traditional banking?
Answer: Online banking, or internet banking, allows individuals to perform various banking transactions and activities through secure websites or mobile apps. It offers the convenience of managing accounts, making payments, and transferring funds remotely, whereas traditional banking primarily involves in-person interactions at physical bank branches.