Money and Banking

Previous Years' CBSE Board Questions

3.1 Money: Meaning, Functions and Supply

MCO

'Money is an asset which can be stored for use in future.' In the light of given statement, identify the function of money.

1. Explain the "store of value" function of money. (Delhi 2017)
2. A measure of value
3. A standard of deferred payment
4. A store of value
5. A medium of exchange (2023) An 2 Read the following statements carefully.

Statement I: Money supply (M₁) in India does not include 'demand deposits' with commercial banks.

Statement II: Money supply (M₁) refers to, assets available with the commercial banks during a particular period of time.

In the light of the given statements, choose the correct alternative from the following.

1. Statement I is true but statement II is false.
2. Statement I is false but statement II is true.
3. Both statements I and II are true.
4. Both statements I and II are false. (2023)
5. Read the following statements carefully and choose the correct alternative.

Statement I: All the coins are issued by Finance Ministry in India.

Statement II: All the currency notes are issued by Reserve Bank of India.

1. Both the statements I and II are true.
2. Both the statements I and II are false.
3. Statement I is true but statement II is false.
4. Statement II is true but statement I is false.

(Term-I, 2021-22) U

4 _ is responsible for issuing ₹ 1 currency note in India.

1. Reserve Bank of India
2. Ministry of Commerce
3. Ministry of Finance
4. NITI Aayog

1. Which of the following is not a function of money?
2. Capital (b) Income
3. Investment (d) Depreciation (AI 2015 C)

VSA (1 mark)

1. State whether the following statement is true or false.

"Demand deposits which come back to the commercial banks through their lending process are known as secondary deposits." (2021 C) :

Two components of money supply are _ and

(2020)

State the two components of M, measure of Money

Supply. (2018)

SAI (3 marks)

State the meaning and components of money supply.

(Delhi 2017)

Explain how controlling money supply is helpful in

reducing excess demand? (Al 2016)

Explain the significance of 'medium of exchange'

function of money. (Delhi 2014)

(4 marks)

13. Explain the 'unit of account' function of money. How

has it solved the related problem created by barter?

(Delhi 2016)

Explain the 'standard of deferred payments' function

of money. How has it solved the related problem

created by barter? (Al 2016)

Explain any two functions of money. (AI 2015 C)

3.2 Commercial Banks

MCQ

1. Process of credit creation by commercial banks comes to an end when .
2. Fresh deposits with banks become zero.
3. Reserve Ratio become zero.
4. Total money reserves become equals to initial deposit. (Term-I, 2021-22) U
5. Money multiplier become zero.

If the Legal Reserve Ratio is 20% and initial deposits

is ₹2,000, then value of money multiplier and total

money creation will be _____ and _____.

1. (c) 4 and ₹ 10.000 (d) 6 and ₹ 2,000 (Term-I, 2021-22)

Given below are two statements, one labelled as

Assertion (A) and the other as Reason (R).

Assertion (A): Reserve Ratio and credit creation

power of commercial banks are directly related.

Reason (R): Credit Creation is the product of the

reciprocal of Reserve Ratio (RR) and Primary deposit.

In the context to the above two statements, which of

the following is correct?

(a) Both A and R are true and R is the correct

explanation of A.

1. Both A and R are true but R is not the correct explanation of A.
2. A is true but R is false.
3. A is false but R is true. (Term-I, 2021-22)

Credit creation by commercial banks is determined by

1. Cash Reserve Ratio (CRR)
2. Statutory Liquidity Ratio (SLR)
3. Initial Deposits
4. All of the above. 2018)

(4 marks)

1. Using a hypothetical numerical example, explain the process of credit creation by a commercial bank.

(2020) Ap

1. Currency is issued by the central bank, yet we say that commercial banks create money. Explain. How is this money creation by commercial banks likely to affect the national income? Explain. (AI 2015)

LA (5/6 marks)

1. Define credit multiplier. What role does it play in determining the credit creation power of the banking system? Use a numerical illustration to explain. (2019)

Who regulates money supply?

1. (b) Reserve Bank of India
2. (d) Planning Commission

3.3 Central Bank and its Functions

MCO

The Reserve Bank of India (RBI) ______ government securities in a bid to _____ the stock of money in the economy.

1. sells, decrease
2. purchases, decrease
3. sells, increase
4. purchases, not change

(AI 2015 C, AI 2014 C) (R)

1. Central Bank as _____, manages public debt of the government.
2. Custodian of Foreign Exchange
3. Agent
4. Financial Advisor
5. Supervisor (Term-I, 2021-22)

Which of the following statements does not support the function of RBI as supervisor to the commercial banks?

1. Regulates the expansion, merger, acquisition, etc. of the bank
2. Formulates all rules and regulations for commercial bank
3. Extend loans to the commercial bank
4. Inspection of operations of banks

(Term-I, 2021-22) Apr

Statutory Liquidity Ratio implies to that percentage of.

"The e-Rupee will provide an additional option to the

currency available forms of money. It is substantially

not different from bank notes, but being digital it is

likely to be easier, faster and cheaper."

1. total deposits of the commercial banks which must be kept in the current account, with the Reserve Bank of India.
2. total deposit of the commercial banks which must be kept in the form of liquid assets, with the Reserve Bank of India.
3. net time and demand deposit liabilities of the commercial banks which must be kept in the form of cash, with the Reserve Bank of India.
4. net time and demand deposit liabilities of the commercial bank which must be kept with themselves in the form of liquid assets.

(Term-I, 2021-22)

1. In order to control the money supply in the economy, the Central Bank may.
2. Buy securities in the open market
3. Sell securities in the open market
4. Reduce Cash Reserve Ratio
5. Reduce Repo Rate (Term-I, 2021-22)

The ratio of total deposits that a commercial bank

has to keep with Reserve Bank of India is called:

1. (b) Deposit Ratio
2. (d) Legal Reserve Ratio (Delhi 2017)

(Al 2015 C, Delhi 2015 C) R

VSA (1 mark)

Define Cash Reserve Ratio.

1. What are Demand Deposits? (Al 2015 C, Delhi 2014)
2. What are Time Deposits? (Al 2015 C, Delhi 2014 C, Al 2014)
3. What is Statutory Liquidity Ratio? (AI 2014 C)

SAI (3 marks)

1. What is meant by Bank Rate? (AI 2014 C)
2. Elaborate any two instruments of Credit Control, as exercised by the Reserve Bank of India. (2019)
3. Explain the 'lender of last resort' function of the Central Bank. (Delhi 2014) (Ap)

SAII (4 marks)

Read the following text carefully.

"After setting up a working group to study the

possibility of a Central Bank Digital Currency (CBDC)

in India 2020, the RBI revealed a concept note on

digital rupee (e-Rupee) on 7th October 2022."