Chapter: Money
1.

The value of money in Fisher’s equation is determined by

A. Demand for money
B. Supply of money
C. Demand and supply of money
D. None of the above
Answer» C. Demand and supply of money
2.

According to the Quantity Theory of Money, the value of money depends upon

A. Quantity theory of money in circulation
B. Purchasing power of money
C. Demand for money
D. Price level
Answer» A. Quantity theory of money in circulation
3.

According to Cambridge equation, the value of money depends upon

A. Demand for money
B. Supply of money
C. Demand for goods and services
D. All of the above
Answer» A. Demand for money
4.

The degree of relationship between the demand for and the supply of money in Fisher’s equation will be

A. 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 > 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑
B. 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 = 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑
C. 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 < 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑
D. None of the above
Answer» B. 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 = 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑
5.

Which is not the function of money

A. Make demand and supply equal
B. Store of value
C. Medium of exchange
D. Measure of value
Answer» A. Make demand and supply equal
6.

High-powered money is also known as

A. Base money
B. Reserve money
C. Narrow money
D. All of the above
Answer» D. All of the above
7.

Who stated, “Bad money drives good money out of circulation, when both of them are full legal tender”?

A. Irving Fisher
B. Milton Friedman
C. J.M. Keynes
D. Thomas Gresham
Answer» D. Thomas Gresham
8.

Value of money is

A. Directly related to the price level
B. Inversely related to the price level
C. Proportionately related to the price level
D. All the above
Answer» B. Inversely related to the price level
9.

Who stated, “Money is what money does”?

A. Milton Friedman
B. Walker
C. Irving Fisher
D. Thomas Gresham
Answer» B. Walker
10.

Barter system means

A. Purchase of commodity with money
B. Sale of commodity with money
C. Purchase and sale of commodity with commodity
D. None of the above
Answer» C. Purchase and sale of commodity with commodity
11.

Which among the following is considered to be the most liquid asset?

A. Gold
B. Money
C. Land
D. Treasury bonds
Answer» B. Money
12.

Currency notes and coins are called as:

A. flat money
B. legal tenders
C. Fiat money
D. Both (b) and (c
Answer» D. Both (b) and (c
13.

Convertible money means

A. It can buy goods
B. Government can give gold against it
C. Illegal money
D. Low value of money
Answer» B. Government can give gold against it
14.

Barter system has the defect of

A. Goods exchanged are of inferior quality
B. Goods cannot be exchanged for services
C. Lack of common measure of value
D. None of the above
Answer» C. Lack of common measure of value
15.

Legal money is called so because

A. The buyer must pay in that money
B. Can be converted into gold
C. Sellers do not accept any other money
D. It is official medium of exchange
Answer» D. It is official medium of exchange
16.

The most important feature of money is

A. General acceptability
B. Convertibility into gold
C. Store of value
D. Medium of exchange
Answer» A. General acceptability
17.

Which property the paper money does not possess:

A. acceptability
B. Divisibility
C. Durability
D. Portability
Answer» C. Durability
18.

In the equation 𝑀𝑀𝑀𝑀 = 𝑃𝑃𝑃𝑃, 𝑉𝑉 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑡𝑡𝑡𝑡

A. Value of money
B. Velocity of circulation of money
C. Variation of national income
D. All of the above
Answer» B. Velocity of circulation of money
19.

In the equation 𝑀𝑀𝑀𝑀 = 𝑃𝑃𝑃𝑃, 𝑀𝑀 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟

A. Money supply
B. Money demand
C. Maximum output
D. Minimum output
Answer» A. Money supply
20.

According to Keynes, motives for holding money are

A. Two
B. Three
C. Four
D. Five
Answer» B. Three
21.

Under normal circumstances, the velocity of circulation of money in a country is

A. 100 %
B. Negative
C. Less than 10
D. Zero
Answer» C. Less than 10
22.

Paper money is called fiat money because

A. It is issued with authority of government
B. It is convertible into gold
C. It can be easily printed
D. It is light weight
Answer» A. It is issued with authority of government
23.

Value of money means

A. Gold purchased by money
B. General Purchasing power of money
C. Importance of money
D. Demand for money
Answer» B. General Purchasing power of money
24.

If the quantity of money increases 100%, other things remaining constant, value of money changes by

A. Increases by 100 %
B. Decreases by 100 %
C. Decreases by 200%
D. Does not change
Answer» B. Decreases by 100 %
25.

Value of money and supply of money are related

A. Inversely
B. Directly
C. Are not related
D. None of the above
Answer» A. Inversely
26.

The quantity demanded of money rises

A. As the interest rises
B. As the interest falls
C. As the supply of money falls
D. As the numberof banks rises
Answer» B. As the interest falls
27.

Equation of exchange is associated with

A. Pigou
B. J.B.Say
C. Marshall
D. Irving Fisher
Answer» D. Irving Fisher
28.

Equation of exchange is converted into the quantity theory of money by assuming the following variables as constants

A. V and T
B. M and V
C. M and P
D. V and P
Answer» A. V and T
29.

Fisher equation of exchange states that

A. P varies directly with income
B. P varies directly with M
C. P and M are constants
D. None of the above
Answer» B. P varies directly with M
30.

In the Fisher’s extended equation of exchange MI VI represents

A. Credit money
B. Primary money
C. Both primary and credit money
D. General Price level
Answer» A. Credit money
31.

In Fisher’s transaction velocity model, which one of the following is not an assumption

A. Velocity of circulation of money is constant
B. The volume of transaction is constant
C. Full employment
D. P is considered as an active factor
Answer» D. P is considered as an active factor
32.

The cash balance equation 𝑀𝑀 = 𝐾𝐾𝐾𝐾𝐾𝐾 was given by

A. Keynes
B. Pigou
C. Robertson
D. Marshall
Answer» D. Marshall
33.

The quantity theory of money was restated by

A. Alfred Marshall
B. Milton Friedman
C. Irving Fisher
D. JM. Keynes
Answer» B. Milton Friedman
34.

Fisher’s equation of exchange considers money as

A. A medium of exchange
B. A store of value
C. Measures of value
D. All of the above
Answer» A. A medium of exchange
35.

Robertson’s equation of exchange considers money as

A. A medium of exchange
B. A store of value
C. Measures of value
D. All of the above
Answer» B. A store of value
36.

The number of times a unit of money exchanges hands during a unit period of time is known as

A. Velocity of the circulation of money
B. Speed of circulation of money
C. Momentum of circulation of money
D. Count of circulation of money
Answer» A. Velocity of the circulation of money
37.

In India, coins are minted at four places, which among the following is one of them

A. New Delhi
B. Chennai
C. Hyderabad
D. All of them
Answer» C. Hyderabad
Chapter: Banking
38.

Which of the following is a qualitative or selective method of credit control by the central bank?

A. Bank rate or Discount Rate Policy
B. Open market operations
C. Cash Reserve Ratio
D. None of the above
Answer» D. None of the above
39.

In what way the Central Bank serves as a Banker’s Bank?

A. By maintaining gold reserve
B. By controlling currency
C. By acting as a lender of the last resort
D. By reducing the interest rates
Answer» C. By acting as a lender of the last resort
40.

Which of the following is not a function of commercial bank?

A. Accepting deposits
B. Creating credits
C. Printing bank notes
D. None of the above
Answer» C. Printing bank notes
41.

Reserve Bank of India(RBI) was established on

A. 1st April,1925
B. 1st April 1935
C. 1st April 1945
D. 1st April 1955
Answer» B. 1st April 1935
42.

Primary deposit in a commercial bank is called

A. Active deposit
B. Passive deposit
C. Derivative deposit
D. All of the above
Answer» B. Passive deposit
43.

Derivative deposit in a commercial bank is also called

A. Active deposit
B. Passive deposit
C. Primary deposit
D. None of the above
Answer» A. Active deposit
44.

Bank rate is

A. The rate of interest charged by banks on their loans
B. The rate of interest paid by banks on deposits
C. Official discount rate at which the Central Bank rediscount approved bills of the commercial banks
D. The interest paid by commercial banks to their beneficiaries
Answer» C. Official discount rate at which the Central Bank rediscount approved bills of the commercial banks
45.

Which of the following is not a function of Central Bank?

A. Enjoys monopoly of note issue
B. Acts as the banker’s bank
C. Creation of credit
D. Lender of the last resort
Answer» A. Enjoys monopoly of note issue
46.

Which of the following is a qualitative method of credit control of a central bank?

A. Bank rate
B. Open market operation
C. Rationing of Credit
D. All of the above
Answer» C. Rationing of Credit
47.

If the central bank wants to control credit, it should

A. Lower the rediscount rate
B. Raise the bank rate
C. Buy securities in the open market
D. Raise cash reserve ratio
Answer» B. Raise the bank rate
48.

Which of the following is a selective credit instrument?

A. variable reserve ratio
B. credit rationing
C. Bank rate
D. All of the above
Answer» B. credit rationing
49.

When the Central Bank intends to expand the credit, it should

A. Raise the margin requirements
B. Raise the variable reserve ratio
C. Lower the bank rate
D. Purchase government securities in the open market
Answer» D. Purchase government securities in the open market
50.

Open Market Operation is

A. Buying and selling of government securities
B. Sale of government securities
C. Buying and selling of government cheques
D. All of the above
Answer» A. Buying and selling of government securities
51.

Open market operation will become successful if there is a

A. free-market economy
B. developing economy
C. well-developed bill and security market
D. All of the above
Answer» C. well-developed bill and security market
52.

Which of the following is not an instrument of selective credit control?

A. Margin requirements
B. Open market operation
C. Credit rationing
D. None of the above
Answer» B. Open market operation
53.

Bank rate policy is not very effective because-

A. It requires a well-developed money market
B. It cannot operate effectively
C. All banks are not under the control of central bank
D. All the above
Answer» A. It requires a well-developed money market
54.

Which of the following is not a quantitative method of credit control

A. Bank arte
B. Open market operation
C. Variable reserve ratio
D. Regulation of consumer credit
Answer» D. Regulation of consumer credit
55.

To what extent the central bank is the lender of the last resort?

A. As it lends to the government
B. As it provides finance to agriculture
C. As it is the ultimate source of credit in times of crisis
D. As it controls the money supply in the economy
Answer» C. As it is the ultimate source of credit in times of crisis
56.

Variable reserve ratio refers to-

A. The ratio which the commercial banks are required to maintain with the central bank
B. The ratio at which the central bank rediscounts first class bills
C. The purchase and sale by the central bank to government securities in the money market
D. All of the above
Answer» A. The ratio which the commercial banks are required to maintain with the central bank
57.

The term bank liquidity implies

A. Management of cash
B. Creation of credit
C. The capacity of the bank to give cash on demand in exchange
D. All of the above
Answer» C. The capacity of the bank to give cash on demand in exchange
58.

What is known as the most profitable asset of a commercial bank?

A. Investment at call and short-notice
B. Loans and advances to its customers
C. Accepting deposits
D. None of the above
Answer» B. Loans and advances to its customers
59.

The fundamental function of a commercial bank is

A. Acceptance of deposits
B. Advancing loans
C. Issuing bank draft
D. Creating credit
Answer» B. Advancing loans
60.

Which of the following is not a function of commercial bank?

A. Accepting deposits
B. Advancing loans
C. Creating credit
D. Printing bank notes
Answer» D. Printing bank notes
61.

Loans and investment of a commercial bank constitute its

A. Derivative deposits
B. Primary deposits
C. Secondary deposits
D. All of the above
Answer» A. Derivative deposits
62.

Bank’s liquidity means

A. Its capacity to create credit
B. Its capacity to provide a high rate of interest
C. Its capacity to supply finance
D. Its capacity to convert its assets into cash
Answer» D. Its capacity to convert its assets into cash
63.

A bank’s capacity to create credit is limited by the

A. Size of cash
B. Size of its area
C. Size of the central bank
D. All of the above
Answer» A. Size of cash
64.

A bank can increase the supply of money by

A. printing notes
B. Creating credit
C. Issuing cheques
D. None of the above
Answer» B. Creating credit
65.

Which of the following public sector banks has the highest number of branches in India?

A. State Bank of India
B. Allahabad Bank
C. Bank of India
D. Punjab National Bank
Answer» A. State Bank of India
66.

Derivative deposits are created during the time of –

A. Accepting demand deposits
B. Accepting drafts
C. Making loans to the customers
D. All of the above
Answer» C. Making loans to the customers
67.

The securities and bonds which a commercial banks holds is also known as

A. Cash reserve ratio
B. Derivative deposits of the banks
C. Secondary deposits of the bank
D. All of the above
Answer» C. Secondary deposits of the bank
68.

Which is known as the most profitable asset of the bank?

A. loans and advance to its customers
B. the investment in government securities
C. life insurance policies of the staff
D. None of the above
Answer» A. loans and advance to its customers
69.

The derivative deposit created by a bank results in-

A. a decrease in the total stock of money
B. an increase in the total stock of money
C. an increase in government securities
D. none of the above
Answer» B. an increase in the total stock of money
70.

What is Currency Deposit Ratio (CDR)?

A. Ratio of money held by the public in currency to that of money held in bank deposits
B. Ratio of money held by the public in bank deposits to that of money held by public in currency
C. Ratio of money held in demand drafts to that of money held in treasury bonds
D. None of the above
Answer» A. Ratio of money held by the public in currency to that of money held in bank deposits
71.

What is the Reserve Deposit Ratio ?

A. The proportion of money RBI lends to commercial banks
B. The proportion of total deposits commercial banks keep as reserves
C. The total proportion of money that commercial banks lend to the customers
D. None of the above
Answer» B. The proportion of total deposits commercial banks keep as reserves
72.

Which among the following is called the rate of interest charged by RBI for lending money to various commercial banks by rediscounting of the bills in India?

A. Bank rate
B. Discount window
C. Monetary Policy
D. Overnight rate
Answer» A. Bank rate
73.

What method is used by the Bank to read code on cheque?

A. MICR
B. OCR
C. OMR
D. None of the above
Answer» A. MICR
74.

Which is the largest private sector bank in India?

A. ICICI
B. Axis Bank
C. HDFC
D. ICICI
Answer» C. HDFC
75.

Who was the first Indian to become Governor of Reserve Bank of India(RBI)?

A. Liaquant Ali Khan
B. T.T. Krishnamachari
C. John Mathai
D. C.D. Deshmukh
Answer» D. C.D. Deshmukh
76.

In July 1969, 14 major Indian Scheduled Banks were nationalized and 6 more banks were nationalized in

A. April 1980
B. May 1980
C. April 1981
D. May 1981
Answer» A. April 1980
77.

Which is the largest private sector bank in India?

A. Axis Bank
B. ICICI Bank
C. HDFC Bank
D. South Indian Bank
Answer» B. ICICI Bank
Chapter: Trade Cycles
78.

The term business cycle refers to

A. Fluctuations in aggregate economic activity over time
B. Ups and down in the production of goods
C. Increasing unemployment
D. Declining savings
Answer» A. Fluctuations in aggregate economic activity over time
79.

Which one of the following is not the characteristic of business cycle?

A. They are recurrent
B. They are not at regular intervals
C. They have uniform causes
D. All of the above
Answer» C. They have uniform causes
80.

The turning points of the business cycle are

A. Expansion and peak
B. Peak and Contraction
C. Contraction and Trough
D. Peak and Trough
Answer» D. Peak and Trough
81.

Which of the following is referred to the top or the highest point of business cycle

A. Expansion
B. Peak
C. Expansion and Peak
D. None of the above
Answer» B. Peak
82.

Trade cycles are caused by

A. Fiscal factors
B. Monetary factors
C. Both monetary and non-monetary factors
D. None of the above
Answer» C. Both monetary and non-monetary factors
83.

During the phase of recovery

A. Aggregate demand remains constant
B. Aggregate demand increases
C. Aggregate demand decreases
D. None of the above
Answer» B. Aggregate demand increases
84.

Who stated that “Trade Cycle is purely a monetary phenomenon”.

A. Keynes
B. Hawtrey
C. Crowther
D. Hayek
Answer» B. Hawtrey
85.

According to Hayek’s overinvestment theory of trade cycle, fluctuation of investment occurs when

A. Natural rate of interest is not equal to market rate of interest
B. Natural rate of interest is equal to market rate of interest
C. Natural rate of interest is equal to the rate of inflation
D. None of the above
Answer» A. Natural rate of interest is not equal to market rate of interest
86.

According to Keynes, in order to fight depression, stabilization policy should include

A. High rate of taxation
B. High interest rate
C. Increased public expenditure
D. None of the above
Answer» C. Increased public expenditure
87.

According to Keynes, fluctuations in the volumes of investment is due to

A. Fluctuations in the volume of savings
B. Fluctuations in the marginal efficiency of capital
C. Fluctuations in the marginal efficiency of labour
D. None of the above
Answer» B. Fluctuations in the marginal efficiency of capital
88.

During the phases of recession of a trade cycle

A. Investment, income, employment and demand decline
B. Investment falls but income rises
C. Income, employment and investment rise
D. None of the above
Answer» A. Investment, income, employment and demand decline
89.

During the downward phase of trade cycle, the central bank of the country should

A. Increase the cash reserve ratio
B. Lower-down the cash reserve ratio
C. Raise the bank rate
D. None of the above
Answer» B. Lower-down the cash reserve ratio
90.

During depression, government expenditure on public works will function as

A. an anti-deflationary tonic
B. a pumb-priming
C. compensatory action
D. None of the above
Answer» B. a pumb-priming
91.

To attain long-term economic stability, the government can introduce

A. Compensatory action
B. Monetary measures
C. Pumb-priming
D. an anti-deflationary tonic
Answer» A. Compensatory action
92.

When the cause of business cycles is attributed to some factor outside the economic system, it is called

A. A periodical theory
B. An innovation theory
C. An exogenous theory
D. None of the above
Answer» C. An exogenous theory
93.

During the upward swing of the trade cycle, the central bank of the country will

A. Raise the cash reserve ratio
B. Raise the bank rate
C. Lower down the cash reserve ratio
D. None of the above
Answer» B. Raise the bank rate
94.

Who stated that “a sudden collapse of the marginal efficiency of capital leads to crisis”

A. Keynes
B. Hawtrey
C. Hayek
D. Schumpeter
Answer» A. Keynes
95.

The trough of a business cycle is referred to as

A. Expansion
B. Boom
C. Trough
D. Peak
Answer» C. Trough
96.

When aggregate economic activity is increasing, the economy is said to be in

A. An expansion
B. A contraction
C. A peak
D. A turning point
Answer» A. An expansion
97.

When aggregate economic activity is declining, the economy is said to be in

A. An expansion
B. A contraction
C. A peak
D. A turning point
Answer» B. A contraction
98.

Peaks and troughs of the business cycle are collectively known as

A. Volatility
B. Turning points
C. Equilibrium points
D. Real business cycle events
Answer» B. Turning points
99.

Who officially determines whether the economy is in recession or expansion?

A. The President of the United States
B. The U.S Congress
C. The Federal Reserve Board of Governors
D. The National Bureau of Economic Research
Answer» D. The National Bureau of Economic Research
100.

In which way recessions affect the real level ofGDP?

A. Recessions cause only temporary reduction in real level of GDP
B. Recessions cause large, permanent reductions in the real level of GDP
C. Recessions cause both temporary and permanent declines in real level of GDP
D. None of the above
Answer» C. Recessions cause both temporary and permanent declines in real level of GDP
Tags
Question and answers in Macroeconomics 2, Macroeconomics 2 multiple choice questions and answers, Macroeconomics 2 Important MCQs, Solved MCQs for Macroeconomics 2, Macroeconomics 2 MCQs with answers PDF download