Money and Banking MCQ — Class 12

Test your understanding of Money and Banking with 20 free questions across Easy and Moderate. Hard and Extreme require Premium. Choose a level in the interactive quiz to answer questions and review explanations.

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Key concepts to revise

Money

Money: a generally accepted medium used to facilitate exchange and express value in monetary transactions

Money supply in the CBSE scope

Money supply in the CBSE scope: currency held by the public plus net demand deposits held with commercial banks under the prescribed measure

Demand deposits

Demand deposits: bank deposits withdrawable on demand and usable for making payments subject to banking arrangements

Commercial-bank credit creation

Commercial-bank credit creation: the banking system can expand deposits and credit through lending subject to reserve requirements and actual lending/deposit behaviour

Reserve requirement effect

Reserve requirement effect: a higher required reserve ratio generally reduces deposit-expansion potential while a lower ratio generally increases it

Bank of issue

Bank of issue: the central bank performs the institutional function of issuing currency as provided by the monetary system

Banker to government

Banker to government: the central bank maintains government banking relations and performs banking functions for the government

Banker’s bank and lender-of-last-resort role

Banker’s bank and lender-of-last-resort role: the central bank holds banking-system reserves and can support banks facing liquidity needs within the policy framework

Quantitative credit control

Quantitative credit control: general monetary tools such as policy rates, reserve ratios and open-market operations influence overall liquidity and credit conditions

Margin requirement

Margin requirement: the prescribed difference between the value of pledged security and the loan granted against it, used as a selective credit-control tool

Try these sample MCQs

1. Which concept best matches this situation? Currency is accepted in payment instead of requiring barter.

  1. Money supply in the CBSE scope
  2. Money
  3. Commercial-bank credit creation
  4. Banker to government
Check answer and explanation

Money. Money: a generally accepted medium used to facilitate exchange and express value in monetary transactions

2. Which concept best matches this situation? Public currency and eligible demand deposits are combined for the syllabus measure.

  1. Demand deposits
  2. Reserve requirement effect
  3. Money supply in the CBSE scope
  4. Banker’s bank and lender-of-last-resort role
Check answer and explanation

Money supply in the CBSE scope. Money supply in the CBSE scope: currency held by the public plus net demand deposits held with commercial banks under the prescribed measure

3. Which concept best matches this situation? A depositor uses a cheque or transfer from a current account.

  1. Commercial-bank credit creation
  2. Bank of issue
  3. Quantitative credit control
  4. Demand deposits
Check answer and explanation

Demand deposits. Demand deposits: bank deposits withdrawable on demand and usable for making payments subject to banking arrangements

After the quiz

Write down the concepts you missed. Explain each one in your own words, give an example, and attempt the level again without notes. A high score on a short quiz does not replace revision of the whole chapter.

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