Money and Banking Class 12 MCQ Quiz – Test Your Understanding!

Are you ready to test your knowledge of Money and Banking from the Class 12 Economics syllabus? This chapter explains the functions of money, the role of the central bank, and the credit creation process in an economy. Understanding these concepts is crucial for CBSE board exams and competitive exams.

About the Quiz

Chapter Name: Money and Banking
Subject: Economics
Book: NCERT Class 12 Economics
Question Type: Multiple Choice Questions (MCQs)
Leaderboard: Yes (Check Your Rank!)

Why Take This Quiz?

✔ Helps in CBSE board exam revision
✔ Strengthens understanding of monetary policy and banking system
✔ Enhances knowledge of RBI’s role in regulating money supply
✔ Track your progress with the leaderboard

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Chapter 2 Money and Banking

1 / 15

How does a cut in the Repo rate by RBI affect the demand for goods and services?

It reduces demand to zero

It decreases the demand

It has no effect on demand

It increases the demand

2 / 15

The Reserve Bank of India can increase the money supply in the economy by ____________. (Choose the correct alternative)

increasing the cash reserve ratio

persuading banks to discourage loans

buying government bonds

demonetization of currency

3 / 15

Read the following statements carefully and choose the correct alternatives given below:

Statement 1 – The value of the money multiplier is determined by the reserve ratio prevailing in the monetary system.

Statement 2 – The process of credit creation directly relates to the value of the reserve ratio.

c. Statement 1 is true and Statement 2 is false

a. Both statements are true.

b. Both statements are false.

d. Statement 2 is true and Statement 1 is false

4 / 15

Which of the following agency is responsible for issuing ₹ 1 currency notes in India?

Ministry of Finance

Reserve Bank of India.

Ministry of Commerce

Niti Aayog

5 / 15

Find the missing figures and choose the correct alternative:

Round	Deposits	Loans (80%)	Reserve Ratio (20%)
I	1,000	800	200
II	800	...(i)...	160


Total	...(ii)...	...(iii)...	...(iv)...

640, 5000, 4000, 1000

960, 5000, 4000, 1000

640, 1000, 4000, 5000

640, 4000, 1000, 5000

6 / 15

Read the following statements carefully and choose the correct alternative from the following:

Statement 1 – Demonetization was the step taken by the Government of India in order to tackle the problems of corruption, black money, terrorism, and circulation of fake currency in the Indian Economy.

Statement 2 – Demonetization has ensured improved tax compliance in India over the period of time.

Statement 2 is true and Statement 1 is false

Both statements are true.

Both statements are false.

Statement 1 is true and Statement 2 is false

7 / 15

Which of the following statements about the money supply is correct?

M1 is a narrow measure, and M3 is a broader measure of money supply.

M1 is a broader measure, while M3 is a narrower measure of money supply.

Money supply is measured over a period of time.

Currency notes and coins are not part of the money supply.

8 / 15

Supply of money refers to……................. (Choose the correct alternative)

currency held in the government account

currency held by the public and demand deposits with commercial banks

currency held by Reserve Bank of India (RBI)

currency held by the public

9 / 15

Suppose in an economy, the initial deposits of ₹ 400 crores lead to the creation of total deposits worth ₹ 4000 crores.

Under the given situation the value of reserve requirements would be________ (Fill up the blank with the correct alternative)

0.1

0.01

0.4

10 / 15

Which of the following is not a Quantitative Method of credit control?

Open Market Operation

Bank Rate Policy

Margin Requirements

Variable Reserve Ratio

11 / 15

If the legal reserve requirement (LRR) is 20%, what is the value of the money multiplier?

12 / 15

Which of the following formulae is INCORRECT?

M3 = M2 + net time deposits of commercial banks

M4 = M3 + total deposits with post office savings banks

M2 = M1 + savings with post office savings banks

M1 = currency + net demand deposits

13 / 15

What happens to the money multiplier when the Cash Reserve Ratio (CRR) increases?

It becomes zero

It increases

It decreases

It remains unchanged

14 / 15

“The value of all goods and services can be expressed in monetary units.” On the basis of the given statement, identify the function performed by money:

Unit of account

Means of a standard of deferred payments

Store of Value

Medium of exchange

15 / 15

Credit cards are excluded from all measures of the quantity of money because they are not really a method of payment, but a method of deferring payment. When you buy a meal with a credit card, the bank that issued the card pays the restaurant the amount that is due. At a later date, you will have to repay the bank, perhaps with interest. For this, you might use the money in your demand deposits, and that money is included in the economy's stock of money.

Which of the following can happen with an increased use of credit cards in an economy?

decrease in money supply

decrease in money demand

increase in money demand

increase in money supply

Your score is

The average score is 67%

Leaderboard – Top Scorers

Check the top scorers here!

Pos.	Name	Score	Duration	Points
1	Atul	73 %	7 minutes 17 seconds	11
2	Sharfraz khan	60 %	3 hours 10 minutes 42 seconds	9

Key Topics Covered in the Quiz

✔ Functions of Money – Medium of exchange, Store of value, Unit of account
✔ Money Supply & Its Measures (M1, M2, M3, M4)
✔ Functions of Commercial Banks – Credit creation process
✔ Role of the Reserve Bank of India (RBI) – Monetary policy tools (CRR, SLR, Repo Rate, Reverse Repo Rate)
✔ Instruments of Credit Control – Quantitative & Qualitative methods

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About the Quiz

Why Take This Quiz?

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Key Topics Covered in the Quiz

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