Please refer to Chapter 9 Money and Banking MCQ Class 12 Economics with answers below. These multiple-choice questions have been prepared based on the latest NCERT book for Class 12 Economics. Students should refer to MCQ Questions for Class 12 Economics with Answers to score more marks in Grade 12 Economics exams. Students should read the chapter Money and Banking and then attempt the following objective questions.

MCQ Questions Class 12 Economics Chapter 9 Money and Banking

Money and Banking MCQ Class 12 Economics provided below covers all important topics given in this chapter. These MCQs will help you to properly prepare for exams.

Question. Which of the following is the credit money?
(a) Cheque and draft
(b) Promissory note
(c) Exchange note
(d) All of these

Question. Which of the following, solves the problem of “Double coincidence of wants” ?
(a) Goods
(b) Banks
(c) Money
(d) All of the above

Question. Commercial banks work for the purpose of
(a) Welfare
(b) Earning profit
(c) Both (a) and (b)
(d) None of the above

Question. _______ is the main function of Central Bank.
(a) Notes issue
(b) Credit creation
(c) Accepting deposits from the public
(d) Advancing loans to public

Question. Which function leads to uniformity in note circulation?
(a) Bank of issue
(b) Custodian of cash reserve
(c) Controller of money supply
(d) Banker’s bank

Question. According to the monetarist view of inflation, an increase in the money supply will
(a) increase output above the natural rate level for a brief period of time.
(b) have no lasting effect on real output.
(c) cause prices to rise.
(d) all of the above.

Question. Which institution performs the activity of credit creation:-
(a) Commercial Banks
(b) Central bank
(c) Both a) and b)
(d) Neither a) nor b)

Question. Who regulates money supply in India?
(a) Government of India
(b) Reserve Bank of India
(c) Planning Commission
(d) NITI Aayog

Question. The creation is called credit creation.
(a) time deposits
(b) primary deposits
(c) secondary deposits
(d) None of these

Question. If LRR is 20%, what is the money multiplier?
(a) 2
(b) 10
(c) 5
(d) 4

Question. Which function allows the payment to be delayed till future date?
(a) Medium of exchange
(b) Measure of value
(c) Store of value
(d) Standard of deferred payments

Question. Money supply is a __ concept.
(a) Flow
(b) Stock
(c) Variable
(d) All of these

Question. Banks are able to create credit many times more than initial deposits through
(a) secondary deposits
(b) providing overdraft facilities
(c) accepting deposits
(d) advancing loans

Question. What items are not included in the Money supply measure?
(a) Currency and coins with the public
(b) inter-bank deposits
(c) Other deposits with RBI
(d) Net demand deposits with banks

Question. In order to encourage investment in the economy, the Central Bank may ________
(a) Reduce Cash Reserve Ratio
(b) Increase Cash Reserve Ratio
(c) Sell Government securities in the open market
(d) Increase Bank Rate

Question. The number of times a unit of money exchanges hands during a unit period of time is known as:
(a) velocity of circulation of money
(b) speed of circulation of money
(c) momentum of circulation of money
(d) count of circulation of money

Question. What are the alternative measures of money supply in India?
(a) M1
(b) M2
(c) M3 and M4
(d) All of these

Question. In order to encourage investment in the economy, the Central Bank may __
(a) Reduce Cash Reserve Ratio
(b) Increase Cash Reserve Ratio
(c) Sell Government securities in the open market
(d) Increase Bank Rate

Question. Which of the following is not a part of legal tender money?
(a) Limited legal tender money
(b) Unlimited legal tender money
(c) Optional money
(d) None of the above

Question. What is the defect of the barter system?
(a) Lack of double coincidence of wants
(b) Difficulty in the measurement of value
(c) Difficulty in store of value
(d) All of these

Question. Bank money is that money which is:
(a) Printed by RBI
(b) Printed by the government
(c) Generated in the form of credit creation
(d) None of these

Question. Initial deposits made by the people from their own resources are called
(a) time deposits
(b) secondary deposits
(c) primary deposits
(d) term deposits

Question. In the terminology of economics and money demand, the terms M1 and M2 are also known as :
(a) Short money
(b) Long money
(c) Broad money
(d) Narrow money

Question. Supply of money refers to the quantity of money:-
(a) As on 31st March
(b) During any specified period of time
(c) As on any point of time
(d) During a fiscal year

Question. The whole monetary market is controlled by (choose the correct alternative)
(a) Government
(b) RBI
(c) Both government and RBI
(d) None of the above

Question. Banking Sector Reforms in India began in:
(a) 1969
(b) 1981
(c) 1991
(d) 2001

Question. Who regulates money supply ?
(a) Govt, of India
(b) Reserve Bank of India
(c) Commercial Bank
(d) Planning Comission

Question. “Money is what money does”. Who said this:
(a) Hartley Withers
(b) Harte
(c) Prof. Thomas
(d) Keynes

Question. Narasimham Committee is related to what:
(a) Improvement in Taxation
(b) Improvement in Infrastructure
(c) Improvement in Agriculture
(d) Improvement in Banking

Question. Which among the following is the near money?
(a) Bonds
(b) Insurance policy
(c) Securities
(d) All of these

Question. Institution that accepts deposits for lending purpose is known as __________
(a) Commercial Bank
(b) Central Bank
(c) Government
(d) Public

Question. Through the process of______________commercial banks are able to create credit, which is in far excess of the initial deposits.
(a) Advancing loans
(b) Money creation
(c) Accepting Deposits
(d) None of these

Question. Banks create credit:-
(a) on the basis of deposits
(b) on the basis of their securities
(c) on the basis of their total assets
(d) Out of nothing

Question. The central bank acts as the last help to commercial banks or public. Which function is highlighted here?
(a) Custodian of cash reserve
(b) Custodian of foreign exchange
(c) Banker’s bank
(d) Lender of last resort

Question. Which of the following is the feature of money?
(a) General acceptability
(b) Homogeneous unit
(c) Liquid asset
(d) All of these 

Question. Which of the following, solves the problem of “Double coincidence of wants” ?
(a) Goods
(b) Banks
(c) Money
(d) All of the above

Question. What is the difference between amount of loan and market value of securities called?
(a) Spread
(b) Margin
(c) Repo rate
(d) Bank rate

Question. Demand Deposits include:-
(a) Saving Account deposits and fixed deposits
(b) Saving Account deposits and current account deposits
(c) Current account deposits and fixed deposits
(d) All types of deposits

Question. Which of the following will increase the money supply?
(a) Fall in repo rate
(b) Purchase of securities in the open market
(c) Decrease in, the cash reserve ratio
(d) All of these

Question. Which of the following is the function of a commercial bank?
(a) Accepting deposits
(b) Credit creation
(c) Agency function
(d) All of these

Question. What happens when central bank purchases securities in open market?
(a) Money supply increases
(b) Money supply decreases
(c) No effect on money supply
(d) None of the above

Question. Initial deposits made by the people from their own resources are called
(a) time deposits
(b) secondary deposits
(c) primary deposits
(d) term deposits

Question. Which of the following is a must for anything to be called money?
(a) Measure of deferred payment
(b) Medium of exchange
(c) Store of value
(d) Measure of value

Question. Which of the following makes a financial institution a bank?
(a) Accepting borrowings
(b) Lending
(c) Accepting demand deposits
(d) Accepting time deposits

Question. What is the Cash Reserve Ratio (CRR)?
(a) the fraction of the deposits that commercial banks lend to the customers
(b) the fraction of the deposits that RBI must keep with commercial banks
(c) the fraction of the deposits that commercial banks must keep with RBI
(d) none of the above

Question. Which of the following is the apex bank of India?
(a) RBI
(b) SBI
(c) SBP
(d) PNB

Question. Money supply includes:-
(a) All deposits in Banks
(b) Only Demand deposits in Banks
(c) Only Time Deposits in Banks
(d) Currency with the Banks

Question. Who circulates all mint and one rupee not in India?
(a) Ministry of Finance
(b) RBI
(c) Ministry of External Affairs
(d) State Government

Question. Money supply refers to:
(a) Currency outside banks and all bank deposits
(b) Currency inside banks and all bank deposits
(c) Currency outside banks and demand deposits in banks
(d) Currency both inside and outside banks and demand deposits in banks

Question. Which is the most liquid measure of the money supply?
(a) M4
(b) M3
(c) M2
(d) M1

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