Students of class 12 Economics should refer to MCQ Questions Class 12 Economics Money and Banking with answers provided here which is an important chapter in Class 12 Economics NCERT textbook. These MCQ for Class 12 Economics with Answers have been prepared based on the latest CBSE and NCERT syllabus and examination guidelines for Class 12 Economics. The following MCQs can help you to practice and get better marks in the upcoming class 12 Economics examination

Chapter 9 Money and Banking MCQ with Answers Class 12 Economics

MCQ Questions Class 12 Economics Money and Banking provided below have been prepared by expert teachers of grade 12. These objective questions with solutions are expected to come in the upcoming Standard 12 examinations. Learn the below provided MCQ questions to get better marks in examinations.

Question: Which of the following leads to increase in AD ?
a) Fall in imports
b) Increase in investment expenditure
c) Increase in government expenditure
d) All of these

Question: Deficient or excess demand can be corrected through
a) Fiscal Policy
b) Monetary Policy
c) Both (a) and (b)
d) None of these

Question: Which of the following is not concerned with banking organization?
a) Bank rate
b) Fiscal deficit
c) Credit creation
d) Cash reserve ratiov

Question: Which of the following is the adequate definition of money?
a) Any goods which is commonly used as a store of value
b) Any goods which is exchanged for gold at a fixed rate
c) Any goods which is acceptable to a bank
d) Any goods which is commonly accepted as a medium of exchange

Question: Which of the following is the component of M1 measure of money supply?
a) Time deposit
b) Bill of exchange
c) Treasury bill
d) None of these

Question: Credit control means:
a) Contraction of credit only
b) Extension of credit only
c) Extension and contraction of money supply
d) None of these

Question: Barter system refers to that system where in:
a) Goods are exchanged for goods
b) Goods are not exchanged at all
c) Goods are exchanged for domestic currency
d) Goods are exchanged for foreign currency

Question: In India there are four alternative measures of money supply M1, M2, M3 and M4 of these M1 =
a) Currency with people
b) Currency with people + demand deposits
c) Currency with people +demand deposits + other deposits with the reserve bank
d) None of these

Question: Which of the following is not the function of commercial bank?
a) To accept deposits
b) To offer loans
c) To provide overdraft facility
d) To fix CRR

Question. Creation of money by commercial banks refers to:
a) Creation of bank deposits
b) Issuing currency
c) Both a) and b)
d) Neither a) nor b)

Question. In India, suppliers of money are:
a) Government of the country
b) Banking system of the country
c) Both a) and b)
d) None of these

Question. The Process of buying and selling of securities by the central bank of a country is known as ________
a) Open market Operations 
b) Margin Requirement
c) Cash Reserve Ratio
d) Statutory Liquidity Ratio

Question. The components of money supply are:
a) Paper currency
b) Coins
c) Demand Deposits
d) All of these

Question. Which of the following is a component of money supply
a) Current Account
b) Recurring Account
c) Term Deposit Account
d) All of the above

Question. Which of the following is a qualitative instrument of credit control?
a) Bank rate
b) Repo rate
c) Open Market Operation
d) Margin Requirements

Question. Given CRR = 4% and SLR = 16%, the value of money multiplier is:-
a) 25
b) 6.25
c) 5
d) 8.33

Question. What items are not included in the measure of Money Supply
a) Currency and coins with the public
b) Time deposits with banks
c) Net Demand deposits with banks
d) None of the above

Question. __________ is the main source of the money supply in an economy.
a) Central Bank
b) Commercial banks
c) Both a) and b)
d) Government

Question. The supply of Money is a: –
a) Flow Concept
b) Monetary Concept
c) Stock Concept
d) None of the above

Question. Which is the correct order of money evolution?
a) Commodity Money, Paper Money, Metal Money
b) Commodity Money, Metal Money, Paper Money, Credit Money
c) Credit Money, Metal Money, Paper Money
d) None of the above

Question. Which of the following statements is/are correct ?
a) ₹1 note is issued by the RBI
b) Both statements are true 
c) Coins are issued by the government of India
d) Both statements are false

Question. Which of the following statement is true?
a) All financial Institutions are banking institutions
b) RBI has the complete authority to issue currency note
c) The Government of India issues currency notes
d) Banking institutions issue currency notes

Question. What are the necessary conditions of Barter System ?
a) Limited Needs
b) Limited Exchange Area
c) Economically Backward Society
d) All the above

Question. Which is the correct order of money evolution ?
a) Commodity Money, Paper Money, Metal Money
b) Commodity Money, Metal Money, Paper Money, Credit Money
c) Credit Money, Metal Money, Paper Money
d) None of the above

Question. Credit money is increased when CRR:
a) Falls
b) Rises
c) Both (a) and (b)
d) None of these

Question. Which one is included in the secondary function of money?
a) To make Deferred Payments
b) Store of Value
c) Transfer of Value
d) All of these

Question. Which of the following is not a function of money?
a) Medium of exchange
b) Price stability
c) Store of value
d) Unit of account

Question. Which is the Agency Function of Commercial Banks?
a) Advancing Loans
b) Accepting Deposits
c) Act as Trustee
d) Locker Facility

Question. High powered money is the money which is produced by
a) RBI
b) Government
c) Commercial banks
d) Both (a) and (b)

Question. Which function considers the value of the money in one unit?
a) Medium of exchange
b) Measure of value
c) Store of value
d) Standard for deferred payments

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

Question. Credit creation of commercial banks is determined by:
a) Cash Reserve Ratio (CRR)
b) Statutory Liquidity Ratio (SLR)
c) Initial Deposits
d) All the above

Question. The number of times the total deposits would be of the initial deposit is determined by:
a) Cash Reserve Ratio
b) Legal Reserve Ratio
c) Statutory Liquidity Ratio
d) Bank Rate

Question. RBI regulates banks by
a) Issuing or cancelling license
b) By merging
c) Supervising time to time
d) All of the above

Question. Which of the following is an apex body for banking systemin India?
a) SBI
b) Central Banks
c) Private Banks
d) None of the above

Question. Which function of RBI 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. Which of the following is an advantage of “Bank of issue” ?
a) Brings uniformity in note circulation
b) Ensures public faith in currency system
c) Stabilization in external and internal value of currency
d) All of the above

Question. Raising Reverse Repo Rate by the central bank is likely to have the following impact on demand for goods and services in the economy.
a) Rise
b) Fall
c) May rise or may fall
d) No effect

Question. High powered Money consists of:-
a) Currency and coins held by the public
b) Currency, cash reserves with banks, and demand deposits
c) Currency held by the public and cash reserves with banks
d) Currency and demand deposits

Question: Central bank is an apex bank of the country that:
a) Controls the entire banking system of the country
b) Issues currency
c) Acts as a banker to the government
d) All of these 

Question: Which of the following is related to barter system of exchange ?
a) Double coincidence of wants
b) Common unit of value
c) Limited exchange
d) Both (a) and (c)

Question: Out of the following , which is the primary function of money supply?
a) Store of value
b) Transfer of value
c) Measure of value
d) Bases of credit 

Question: Which of the following is not the instrument of credit control?
a) CRR
b) SLR
c) Repo rate
d) Managed floating

Question: The minimum percentage of a bank’s total deposits which is required to be kept with the RBI is called:
a) CRR
b) Repo rate
c) SLR
d) Reverse Repo Rate

Question: Full- bodied money is that money, whose money value and commodity value are:
a) Equal
b) Proportionately equal
c) Different
d) None 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: Which of the following system governs note issuing in India
a) Proportionate system
b) Minimum reserve system
c) Fixed fiduciary issue system
d) Simple deposit system

Question:A commercial bank is a bank that:
a) Gives long-term loans
b) Creates credit
c) Gives short-term loans
d) All of these

Question: Non- chequeable deposits are those:
a) Against which no cheque can be drawn at any time
b) Against which no money can be withdrawn
c) Which are called fixed deposit
d) All of these

Question: Credit cards issued by the banks:
a) Encourage Consumer Spending
b) Increase Aggregate Demand In the Economy
c) Both (a) and (b)
d) None of these

We hope the above multiple choice questions for Class 12 Economics for Chapter 9 Money and Banking provided above with answers based on the latest syllabus and examination guidelines issued by CBSE, NCERT and KVS are really useful for you. Money and Banking is an important chapter in Class 12 as it provides very strong understanding about this topic. Students should go through the answers provided for the MCQs after they have themselves solved the questions. All MCQs have been provided with four options for the students to solve. These questions are really useful for benefit of class 12 students. Please go through these and let us know if you have any feedback in the comments section.