Important Questions for CBSE Class 12 Economics Chapter 3

Important questions with answers for CBSE Class 12 Economics Chapter 3 ‘Money and Banking’, which are outlined by expert Economics teachers from the latest version of CBSE (NCERT) books.

CBSE Class 12 Macroeconomics Chapter 3 Important Questions

Question 1

A central bank is a/an _______.

a. Apex bank

b. Rural bank

c. Regional bank

d. Commercial bank

Answer:

a. Apex bank

Question 2

Legal reserve ratio is equal to _______.

a. CRR/SLR

b. CRR – SLR

c. SLR – CLR

d. CRR + SLR

Answer:

d. CRR + SLR

Question 3

Calculate the value of the money multiplier and the total deposit created if the initial amount is rupees 700 crore and the LRR is 10%.

Answer:

Value of the money multiplier = 1/LRR, which is equal to 1/0.1 = 10

Initial deposit was Rs. 700 crore

Thus, the total deposit will be:
Initial deposit x Money multiplier

= 700 × 10

= 7,000 crores

Question 4

Calculate the LRR if the initial deposit of rupees500 crore leads to the establishment of the total deposit of rupees 4,000 crore.

Answer:

Money multiplier = Total deposits/Initial deposits

= 4,000/500 = 8

Thus, money multiplier = 1/LRR

8 = 1/LRR

LRR = 0.125 or 12.5

Question 5

If the total deposits created by commercial banks are ₹. 12,000 and the LRR is 25%, calculate the initial deposit.

Answer:

Money multiplier = 1/LRR = 1/0.25 = 4

Initial deposit = Total deposit/Money Multiplier

= 12,000/4

= ₹3,000

Question 6

One of the measures of money supply is ________ .

a. O1

b. N1

c. M1

d. P1

Answer:

c. M1

Also, check: Money Creation by Banking System

Question 7

Money is a medium of ________ .

a. Communication

b. Barter

c. Exchange

d. Speculation

Answer:

c. Exchange

Question 8

Money is something that is _______ .

a. Universally accepted

b. Locally accepted

c. Accepted by banks

d. Regionally accepted

Answer:

a. Universally accepted

Question 9

One drawback of barter exchange is the _________.

a. Lack of trust

b. Lack of coincidence of wants

c. Lack of double coincidence of wants

d. Lack of goods

Answer:

c. Lack of double coincidence of wants

Question 10

Does money overcome the issues of the barter system?

a. Cannot say

b. Seldom

c. No

d. Yes

Answer:

d. Yes

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