Money and Banking MCQ Questions with Answers

Question 1 : Which one of the following money supplies is also known as Narrow Money in the Indian economy?

a) M1
b) M2
c) M3
d) M4

Answer : a

Question 2 : Which one of the following agencies of the Indian Government publishes the Narrow Money (M1) and Broad Money (M3) on fortnightly basis?

a) State Bank of India
b) Security Exchange Board of India
c) Reserve Bank of India
d) Central Statistical Organisation

Answer : c

Question 3 : Which one of the following money supplies in the Indian economy consist the total post office savings?

a) M1
b) M2
c) M3
d) M4

Answer : d

Question 4 : The Reserve Bank of India defines Narrow Money as 

a) CU (currency notes + coins) + DD (net demand deposits held by commercial banks)
b) CU + DD + saving deposits with post office savings banks
c) CU + DD + net time deposits of commercial banks
d) CU + DD + net time deposits of commercial banks + total deposits of post offices

Answer : a

Question 5 : Which one among the following is the total amount of money available in an economy at a specific time?

a) Near money
b) Narrow money
c) Money volume
d) Money stock

Answer : d

Question 6 : Which one among the following is the source of the Reserve Money in India?

a) Net foreign exchange assets of RBI
b) Governments currency liabilities to the public
c) Net non-monetary liabilities of the RBI
d) All of the above

Answer : d

Question 7 : The money multiplier in an economy increases with which one of the following?

a) Increase in the cash reserve ratio
b) Increase in the banking habit of the population
c) Increase in the statutory liquidity ratio
d) Increase in the population of the country

Answer : b

Question 8 : Multipliers will be lower with which one of the following?

a) High marginal propensity to consume
b) Low marginal propensity to consume
c) High marginal propensity to invest
d) Low marginal propensity to save

Answer : b

Question 9 : The higher rate of expansion in currency with the public and reserves as compared to that in deposits in an economy leads to

a) the money multiplier remains unchanged
b) increases at the first then decreases later on
c) an increase in the money multiplier
d) a decrease in the money multiplier

Answer : d

Question 10 : Which one of the following is the major component of the money supply in the Indian Economy?

a) Currency component
b) Deposit component
c) Treasury bills with public
d) Both (a) and (b)

Answer : d

Question 11 : If you withdraw Rs.1,00,000 in cash from your Demand Deposit Account at your bank, the immediate effect on aggregate money supply in the economy will be

a) to reduce it by Rs.1,00,000
b) to increase it by Rs.1,00,000
c) to increase it by more than Rs.1,00,000
d) to leave it unchanged

Answer : d

Question 12 : Foreign currency which has a tendency of quick migration is called

a) Hot currency
b) Gold currency
c) Soft currency
d) Hard currency

Answer : a

Question 13 : Which one among the following is the globally traded currency that can serve as a reliable and stable store of value?

a) Soft currency
b) Broad currency
c) Local currency
d) Hard currency

Answer : d

Question 14 : Which one among the following is correct about the money whose value comes from a commodity out of which it is made?

a) Fiat money
b) Commodity money
c) Near money
d) Electronic money

Answer : b

Question 15 : Which of the following is the correct definition of Hot Money?

a) This is the fund which is dumped into a country to get the advantage of a favourable interest rate and hence bring high returns
b) This is the fund which is provided by a bank in US Dollar at very short notice at a very high rate of interest and for a longer period of repayment
c) This is the fund which is pushed into market through Hawala or some other such illegal method and is sometime referred to as a Black money
d) Both (a) and (c)

Answer : a

Question 16 : Which one of the following pairs is correctly matched?

a) M0 – Reserve Money
b) M1 – Broad Money
c) M2 – Narrow Money
d) None of the above

Answer : a

Question 17 : Consider the following elements

I. Broad Money (M3)
II. All deposits with Post Office Savings Banks
III. National Savings Certificates

Which of the elements given above are the parts of the M4-Money Supply in Indian Economy?

a) I and II
b) I and III
c) II and III
d) All of these

Answer : a

Question 18 : With reference to Fiat Money, consider the following statements

I. It is the money declared by a government to be legal tender
II. It is the money without intrinsic value
III. It is the state-issued money which is neither legally convertible to any other thing, nor fixed value in terms of any objective standard

Which of the following statements given above is/are correct?

a) I and II
b) Only I
c) Only II
d) All of the above

Answer : d

Question 19 : Which of the following is/are examples of ‘Near Money’?

I. Treasury Bill
II. Credit card
III. Savings accounts and small time deposits
IV. Retail money market mutual funds

Which of the following statements given above is/are correct?

a) Only I
b) Only II
c) I, II and III
d) I, III and IV

Answer : d

Question 20 : Consider the following

I. New Broad Money (NM3)
II. New Narrow Money
III. All deposits with the Post Office savings banks
IV. National Savings Certificates

Which of the components given above are correct included in the Liquidity Aggregates in the Indian Economy?

a) I, II, III and IV
b) II and III
c) I and III
d) II and IV

Answer : c

Question 21 : Consider the following

I. Currency in circulation
II. Banker’s deposits with the RBI
III. Call/Item funding from financial institutions
IV. ‘Other’ deposits with the RBI

Which of the components given above is/are included in the calculation of Reserve Money in India?

a) I and II
b) II, III and IV
c) I, II and
d) Only II

Answer : b

Question 22 : Which of the following measures would result in an increase in the money supply in the economy?

I. Purchase of government securities from the public by the Central Bank
II. Deposit of currency in commercial banks by the public
III. Borrowing by the government from the Central Bank
IV. Sale of government securities to the public by the Central Bank

a) Only I
b) II and IV
c) I and III
d) II, III and IV

Answer : c

Question 23 : Legal Tender Money refers to

a) Currency notes
b) Bills of exchange
c) Cheques
d) Drafts

Answer : a

Question 24 : Rs.1 bite released in the country and it bears the signature of

a) Finance Secretary
b) RBI Governor
c) Prime Minister
d) Speaker

Answer : a

Question 25 : Demonitisation of Rs.500 and Rs.1000 currency notes was announced on

a) 8th November, 2016
b) 1st January, 2017
c) 15th August, 2016
d) 31st March, 2017

Answer : a

Question 26 : Money for public utility is issued by the government through consolidated fund of India through

a) Finance Minister
b) RBI Governor
c) Finance Secretary
d) None of the above

Answer : a

Question 27 : Where is India’s modernised currency notes press situated?

a) Nasik
b) Mysore
c) Hoshangabad
d) Hyderabad

Answer : b

Question 28 : Which of the following prints currency notes of the denomination of Rs.100?

a) The Indian Security Press, Nasik Road
b) The Bank Note Press, Dewas
c) The Security Printing Press, Hyderabad
d) All of the above

Answer : b

Question 29 : The 100 Rupee Currency Note in India is signed by

a) Governor, Reserve Bank of India
b) Secretary, Ministry of Finance
c) Finance Minister of India
d) Prime Minister of India

Answer : a

Question 30 : Which among the following currencies is the costliest?

a) French Franc
b) Swiss Franc
c) Euro
d) Pound Sterling

Answer : d

Question 31 : Which one of the following is not the most likely measure the government/RBI takes to stop the slide of Indian Rupee?

a) Curbing imports of non-essential goods and promoting exports
b) Encouraging Indian borrowers to issue rupee denominated Masala Bonds
c) Easing conditions relating to external commercial borrowing
d) Following an expansionary monetary policy

Answer : d

Question 32 : Consider the following statements

I. The printing of notes is the total management of Reserve Bank of India
II. The volume of rupee coins and smaller coins are controlled by the Ministry of Finance

Which of the following statements given above is/are correct?

a) Only I
b) Only II
c) Both I and II
d) Neither I nor II

Answer : a

Question 33 : Consider the following statements

I. Reserve Bank of India can print and issue currency notes of denominations from two rupee notes to ten-thousand rupee notes.
II. Reserve Bank of India maintains a separate issue department to look after currency issue

Which of the following statements given above is/are correct?

a) Only I
b) Only II
c) Both I and II
d) Neither I nor II

Answer : c

Question 34 : The Government of India and RBI have decided to introduce 1 billion pieces of Rs.10 notes in polymer/plastic on a field trial basis. Which of the following is or are the objectives behind the notes.

I. Increase of the lifetime of the notes
II. Combating counterfeiting
III. Reducing cost of mining of currency.

Which of the following statements given above is/are correct?

a) I and II
b) Only II
c) Only III
d) All of these

Answer : d

Question 35 : In the context of India, which of the following factors is/are contributor/contributors to reducing the risk of a currency crisis?

I. The foreign currency earnings of India’s IT sector
II. Increasing the government expenditure
III. Remittances from Indians abroad

Which of the following statements given above is/are correct?

a) Only I
b) I and III
c) Only II
d) I, II and III

Answer : b

Question 36 : Consider the following statements.

The price of any currency in international market is decided by the

I. World Bank
II. demand for goods/services provided by the country concerned
III. stability of the government of the concerned country
IV. economic potential of the country in question

Which of the following statements given above is/are correct?

a) I, II, III and IV
b) II and III
c) III and IV
d) I and IV

Answer : b

Question 37 : The Reserve Bank of India was established in the year

a) 1930
b) 1935
c) 1947
d) 1951

Answer : b

Question 38 : The RBI was established on 1st April, 1935 on the recommendation of 

a) Khandwal Commission
b) Narasimha Commission
c) Nachiket Mor Commission
d) Hilton Young Commission

Answer : d

Question 39 : When was RBI nationalised?

a) 1935
b) 1949
c) 1929
d) 1914

Answer : b

Question 40 : Who was the first Governor of RBI?

a) CD Deshmukh
b) Sir James Taylor
c) PC Bhattacharya
d) Sir Osborne Smith

Answer : d

Question 41 : To lower interest rates, the RBI should

a) purchase of securities
b) decrease the money supply
c) raise the treasury bill rate
d) raise the reserve requirement

Answer : a

Question 42 : If the interest rate is decreased in an economy, it will

a) decrease in consumption expenditure in the economy
b) increase the tax collection of the government
c) increase the investment expenditure of the economy
d) increase in total saving of the economy

Answer : c

Question 43 : Financial inclusion as per RBI means

a) greater consumer protection for newly included customers
b) an easily accessed and speedy grievance redressal process
c) expanded efforts on financial literacy
d) All of the above

Answer : d

Question 44 : Gil-edged means

a) bullion market
b) market of Government securities
c) market of guns
d) market of pure metals

Answer : b

Question 45 : PCA stands for 

a) Public Current Account
b) Principles of Corporate Accounting
c) Prompt Corrective Action
d) Public Channel Agency

Answer : c

Question 46 : Which of the following is called a Banker’s Cheque?

a) Demand Draft
b) Debit Card
c) Pay Order
d) Fixed Deposit

Answer : a

Question 47 : Which one of the following is the mechanism used by Reserve Bank of India (RBI) under its credit policy by which provides to the states banking with it to help them to tide over temporary mismatches in the cash flow of their receipts and payments?

a) State Liquidity Adjustment Facility
b) Cash Reserve Requirement
c) Liquidity Adjustment Facility
d) Ways and means advances

Answer : d

Question 48 : Which of the following statements best describes the term ‘Scheme for Sustainable Structuring of Stressed Assets (S4A), recently seen in the news?

a) It is a procedure for considering ecological costs of developmental schemes formulated by the government
b) It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties
c) It is disinvestment plan of the government regarding Central Public Sector Undertakings
d) It is recently implemented provision of ‘Insolvency and Bankruptcy Code’.

Answer : b

Question 49 : Consider the following statements

I. Reserve Bank of India was nationalised in the year 1955
II. Reserve Bank of India is a member bank of the Asian Clearing Union

Which of the following statements given above is/are correct?

a) Only I
b) Only II
c) Both I and II
d) Neither I nor II

Answer : b

Question 50 : Consider the following statements

I. Reserve Bank of India (RBI) was established in 1935
II. The share capital RBI was divided into shares of 100 each which was entirely owned by private shareholders in the beginning.

Which of the following statements given above is/are correct?

a) Only I
b) Only II
c) Both I and II
d) Neither I nor II

Answer : c

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