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    This document contains an economics assignment on money and banking for Class 12. It includes: 1) 20 multiple choice questions testing concepts related to the RBI, money supply, commercial banking functions. 2) Short answer questions defining key terms like money, fiat money, and demand deposits and explaining banking concepts. 3) Longer answer questions calculating credit creation, explaining the functions of central banks, and discussing how money solves economic issues like the double coincidence of wants. The assignment evaluates students' understanding of central banking, monetary policy, commercial banking operations and the role of money in the Indian economy.

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    985 FD

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    53 views5 pages
    This document contains an economics assignment on money and banking for Class 12. It includes: 1) 20 multiple choice questions testing concepts related to the RBI, money supply, commercial banking functions. 2) Short answer questions defining key terms like money, fiat money, and demand deposits and explaining banking concepts. 3) Longer answer questions calculating credit creation, explaining the functions of central banks, and discussing how money solves economic issues like the double coincidence of wants. The assignment evaluates students' understanding of central banking, monetary policy, commercial banking operations and the role of money in the Indian economy.

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    This document contains an economics assignment on money and banking for Class 12. It includes: 1) 20 multiple choice questions testing concepts related to the RBI, money supply, commercial banking functions. 2) Short answer questions defining key terms like money, fiat money, and demand deposits and explaining banking concepts. 3) Longer answer questions calculating credit creation, explaining the functions of central banks, and discussing how money solves economic issues like the double coincidence of wants. The assignment evaluates students' understanding of central banking, monetary policy, commercial banking operations and the role of money in the Indian economy.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    53 views5 pages

    985 FD

    Uploaded by

    Viplav
    This document contains an economics assignment on money and banking for Class 12. It includes: 1) 20 multiple choice questions testing concepts related to the RBI, money supply, commercial banking functions. 2) Short answer questions defining key terms like money, fiat money, and demand deposits and explaining banking concepts. 3) Longer answer questions calculating credit creation, explaining the functions of central banks, and discussing how money solves economic issues like the double coincidence of wants. The assignment evaluates students' understanding of central banking, monetary policy, commercial banking operations and the role of money in the Indian economy.

    Copyright:

    © All Rights Reserved
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    of 5

    AMITY INTERNATIONAL SCHOOL, PUSHP VIHAR

    ECONOMICS
    CLASS XII
    ASSIGNMENT
    TOPIC : MONEY AND BANKING
    MULTIPLE CHOICES QUESTIONS

    1. Assertion (A)- RBI gives licence to commercial banks and supervise them.
    Reason (R)- RBI is the largest bank of country.
    a) both (A) & (R) both are true and (R) is correct explanation of (A)
    b) both (A) & (R) both are true and (R) is not correct explanation of (A)
    c) (A) is true but (R) is false
    d) (A) is false but (R) is true

    2. Assertion (A)- when CRR is increased, credit creation capacity of commercial banks reduces.
    Reason (R)- with increase in reserve ratios, banks have less funds available for loans.
    a) both (A) & (R) both are true and (R) is correct explanation of (A)
    b) both (A) & (R) both are true and (R) is not correct explanation of (A)
    c) (A) is true but (R) is false
    d) (A) is false but (R) is true

    3. Assertion (A)-Money supply is a flow concept.


    Reason (R)- money supply refers to total currency circulation at a point of time.
    a) both (A) & (R) both are true and (R) is correct explanation of (A)
    b) both (A) & (R) both are true and (R) is not correct explanation of (A)
    c) (A) is true but (R) is false
    d) (A) is false but (R) is true

    Read the following case study paragraph carefully and answer the question 4-6 on the basis of the
    same.
    The Indian economy has diversified quite significantly and been growing rapidly since 1991, and
    getting increasingly integrated with the global economy. Therefore, the fourth generation (1991-
    2014) of Indian banking saw landmark reforms such as issue of fresh licences to private and foreign
    banks to infuse competition, thereby enhancing productivity as well as efficiency by leveraging
    technology; introduction of prudential norms; providing operational flexibility coupled with
    functional autonomy; focus on implementation of best corporate governance practices; and
    strengthening of capital base as per the Basel norms. Since 2014, the banking sector has witnessed
    the adoption of the JAM (Jan-Dhan, Aadhaar, and Mobile) trinity, and issuance of licences to
    Payments Banks and Small Finance Banks
    (SFBs) to achieve last-mile connectivity in the financial inclusion drive. For instance, SFBs had
    mobilised deposits of ₹82,488 crore and extended credit of ₹90,576 crore to small and marginal
    farmers, and MSMEs (micro small & medium enterprises) by the end of FY 2019-20.Given the
    current challenges of a burgeoning population, the ongoing Covid-19 pandemic, and the West’s
    intention to shift its manufacturing base as well as supply/value chains
    from China to India and elsewhere, it is essential to say ‘yes’ to fifth generation (2014 and beyond)
    banking reforms. This calls for a paradigm shift in the banking sector to improve its resilience and
    maintain financial stability.The Narasimham Committee Report (1991), as well as the discussion
    paper on Banking structure in India – The way forward (Reserve Bank of India, 2013), emphasised
    that India should have three or four large commercial banks, with domestic and international
    presence, along with foreign banks. The second tier may comprise several mid-size lenders,
    including niche banks, with economy-wide presence.

    4. How does financial inclusion programme “jan dhan yojana” affect financial conditions of
    commercial banks:-
    a) Availability of funds with commercial banks have increased
    b) Availability of funds with commercial banks have decreased
    c) Not affected in any way
    d) None of these

    5. Small Finance Banks had mobilised deposits of ₹82,488 crore and extended credit of
    ₹90,576 crore to small and marginal farmers, and MSMEs (micro small & medium
    enterprises) by the end of FY 2019-20. How will it affect economy
    a) Growth of MSME and agriculture sector become faster
    b) Financial inclusion of people
    c) Economic strengthening of rural areas
    d) All of above

    6. What type of fourth generation reforms are made by government in banking sector:-
    a) Reduction in mandatory reserves
    b) Operational flexibility
    c) Improvement in competition
    d) All of above

    7. Assertion (A)- Credit creation process increases the money supply in economy .
    Reason (R)- through the credit creation process commercial banks can distribute loans
    many times as compare to their primary deposits.
    a) both (A) & (R) both are true and (R) is correct explanation of (A)
    b) both (A) & (R) both are true and (R) is not correct explanation of (A)
    c) (A) is true but (R) is false
    d) (A) is false but (R) is true

    8. Central bank of a country does not deal with--------------------


    a) State government
    b) Central government
    c) General public
    d) Commercial banks

    9. Credit creation in commercial banks is determined by


    a) Cash Reserve ratio
    b) Statutory liquidity Ratio
    c) Initial Deposits
    d) All the above

    10. Assertion (A)-Central bank purchase and sell government securities according to
    conditions.
    Reason (R)-Central bank works as a banker to the government.
    a) both (A) & (R) both are true and (R) is correct explanation of (A)
    b) both (A) & (R) both are true and (R) is not correct explanation of (A)
    c) (A) is true but (R) is false
    d) (A) is false but (R) is true

    11. Assertion (A)-settlement of liabilities of commercial banks is done by RBI.


    Reason (R)- RBI holds the accounts of all commercial banks and commercial banks keep
    funds in it essentially.
    a) both (A) & (R) both are true and (R) is correct explanation of (A)
    b) both (A) & (R) both are true and (R) is not correct explanation of (A)
    c) (A) is true but (R) is false
    d) (A) is false but (R) is true

    12. Assertion (A)-Governor of RBI gives advises to central government regarding tax,
    expenditure related decisions.
    Reason (R)- it is essential for the government to follow the advises of RBI.
    a) both (A) & (R) both are true and (R) is correct explanation of (A)
    b) both (A) & (R) both are true and (R) is not correct explanation of (A)
    c) (A) is true but (R) is false
    d) (A) is false but (R) is true

    13. Which bank is authorized to issue currency notes?


    a) Central Bank
    b) Commercial Bank
    c) Cooperative Bank
    d) Scheduled Bank

    14. Money that is issued by the authority of the government is called:


    a) Full bodied money
    b) Credit Money
    c) Fiat Money
    d) Fiduciary Money

    15. Who regulates money supply in India?


    a) Government of India
    b) Reserve Bank of India
    c) Commercial Banks
    d) NITI Ayog

    16. Demand deposits include :


    a) Chequeable deposits
    b) Deposits which can be withdrawn on demand
    c) Fixed deposits for a period
    d) Both (a) and (b)

    17. Supply of money is a:


    a) Flow variable
    b) Stock variable
    c) Real flow
    d) None of these

    18. In India, coins are issued by:


    a) State bank of India
    b) Reserve bank of India
    c) Ministry of finance
    d) Ministry of urban development

    19. High powered money is equal to:


    a) Money supplied by the RBI ONLY
    b) Total supply of money in the economy
    c) Notes and coins held by the people
    d) Money (notes and coins) held by the public, vault cash of the commercial banks as well

    20. In India, Money supply (M1) is equal to:


    a) Currency with people
    b) Currency with people +Demand Deposits
    c) Currency with people+ Net Demand deposits held by the commercial banks
    d) None of these

    ASSIGNMENT ( Money)
    1. Define money. (1)
    2. What is the basic characteristics of money? (1)
    3. Define fiat money. (1)
    4. What are Demand deposit? (1)
    5. List its components of M1 measure of money Supply. (3)
    6. Differentiate between intrinsic value / commodity value and face value of Money. (3)
    7. Why people hold notes and coins when it is clear that intrinsic value of notes and coins is almost
    negligible?(3)
    8. Why does the cash deposits of Government and of commercial banks with the RBI are not treated
    as money supply? (3)
    9. Do you think excess of money supply hinders the process of economic growth? Give reason. (4)
    10. Explain ‘difficulty in storing wealth’ problem faced in the barter system. (4)
    11. How money has solved the problem of Double coincidence of wants? (3)
    Or
    Introduction of money and separated the act of sale and purchase. How? (3)
    Banking

    1. Differentiate between bank rate and repo rate. (3)


    2. Differentiate between demand deposits and fixed deposits. (3)
    3. Explain government’s bank function of the central bank. (3)
    4. Explain the lender of Last Resort function of the central bank. (3)
    5. What will happen to the process of credit creation when the Reserve requirements are
    increased by the commercial bank? (4)
    6. Calculate total deposits created by commercial bank if reserve ratio is 10% and primary
    deposits are 1200 crore rupees. (4)
    7. Discuss the meaning of any two methods of extending credit / increase money Supply, which
    may be adopted by Central Bank. (4)
    8. If legal reserve ratio is 15% and new deposits are rupees 2000. Explain the process of credit
    creation by commercial bank. (6)

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