Money and Banking

1. What is the primary function of money?

• a) Medium of exchange
  
  
  

• b) Measure of income

• c) Means of production

• d) Distribution of wealth

2. Which of the following is NOT a function of a central bank?

• a) Issuing currency
  
  
  

• b) Lending to the public

• c) Controlling credit

• d) Acting as a banker to the government

3. What is the term for the ratio of a bank's reserves to its total deposits?

• a) Reserve requirement

• b) Cash ratio

• c) Statutory liquidity ratio

• d) Deposit multiplier

4. In India, who is responsible for issuing currency notes?

• a) Government of India

• b) State Bank of India

• c) Reserve Bank of India

• d) Ministry of Finance

5. Which of the following is considered a component of the money supply?

• a) Savings bonds

• b) Treasury bills

• c) Currency in circulation

• d) Corporate shares

6. Which monetary policy tool involves the buying and selling of government securities in the open market?

• a) Cash reserve ratio (CRR)

• b) Open market operations (OMO)

• c) Statutory liquidity ratio (SLR)

• d) Bank rate

7. What is the main objective of a central bank’s monetary policy?

• a) Increase inflation

• b) Stabilize the economy

• c) Increase employment only

• d) Control government spending

8. What is the cash reserve ratio (CRR)?

• a) Percentage of a bank's deposits held in government bonds

• b) Portion of deposits banks must keep as cash with the central bank

• c) Amount banks lend to each other in the market

• d) Interest rate set by commercial banks

9. Which type of money is used as a legal tender and recognized by law?

• a) Fiat money

• b) Commodity money

• c) Barter money

• d) Crypto money

10. The term "liquidity" in banking refers to:

• a) Ability to meet long-term obligations

• b) Ability to meet short-term obligations

• c) Profitability of the bank

• d) None of the above