AR M AND B 2024

Assertion (A): To boost the falling demand in the economy. Reserve bank of India

recently reduced repo rate and bank rate.

Reason (R): Decrease in repo rate and bank rate causes decreases in the rate of interest

which leads to rise demand of credit because of which more money flows into the

economy, purchasing power of people increases. Thus, aggregate demand rises and

deficient demand is corrected.

• a

• b

• c

• d

Assertion (A): Anything will be called money if the law of country proclaims it to be

money. It will be commonly accepted measure of value as it will be endowed with legal

tender power (Limited and unlimited).Thus “money is what the law says it is”

Reason (R): Limited legal tender money can be accepted up to a certain limit. For

example, in India, coins up to Rs1000 only (as per coinage bill, August 2011) can be

accepted legally in payment. All currency notes have unlimited legal tender.

• a

• b

• c

• d

Assertion (A): Money supply is a flow concept.

Reason (R): Money Supply always measured at a particular point of time.

• a

• b

• c

• d

Assertion (A): The reserve bank of India had in March 2020 offered a three months

moratorium on loans enabling borrowers to defer repayment on EMI and other loans.

Reason (R): The loan moratorium was aimed at providing borrowers relief aimed the

economic impact of the covid-19 pandemic.

• a

• b

• c

• d

Assertion (A): Currency held by public is a monetary liability of central bank.

Reason (R): Central bank controls credit, whereas commercial banks create credit with

currency held by public.

• a

• b

• c

• d

Assertion – 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.

Reason– Demonetization has ensured improved tax compliance in India over the period of

time.

• a

• b

• c

• d

Assertion – Supply of money consists of currency held by the people and net demand

deposits held by the Commercial Banks

Reason – Supply of money is the quantity of money over a period of time.

• a

• b

• c

• d

Assertion – Credit multiplier is inversely related to CRR and is the reciprocal of CRR.

Reason – In times of inflation, RBI raises the CRR to control money supply in the

economy.

• a

• b

• c

• d

Assertion – M2 and M4 include saving deposits of post office savings organisations in

India.

Reason - M1 is most liquid and easiest for transactions whereas M4 is least liquid of all.

• a

• b

• c

• d

Assertion – The monetary policy rests with RBI in India which controls credit and money

supply in the economy.

Reason – To combat excess demand in the economy, RBI increases the margin

requirement, one of the important qualitative measures of the monetary policy.

• a

• b

• c

• d