Demand and Supply of Money MCQ Practice Questions

Ques: 1

Consider the following liquid assets :

Demand deposits with the banks
Time deposits with the banks
Savings deposits with the banks
Currency
The correct sequence of these assets in the decreasing order of liquidity is-

(A) 1-4-3-2 (B) 4-3-2-1 (C) 2-3-1-4 (D) 4-1-3-2

Ques: 2

What is black money?

(A) It is an illegal currency (B) It is a Fake currency (C) It is dirty/bad money (D) It is an illegal income upon which income tax is not paid

Ques: 3

Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?

(A) Diversion of resources to the purchase of real estate and investment in luxury housing (B) Investment in unproductive activities and purchase of precious stones, jewellery, gold, etc. (C) Large donations to political parties and growth of regionalism (D) Loss of revenue to the State Exchequer due to tax evasion

Ques: 4

Due to inflation :
Prices of goods increase

(A) The value of money falls (B) The exchange rate improves (C) and (D)

Ques: 5

Who amongst the following benefits most from inflation :

(A) Creditors (B) Debtors (C) Savings Account holders (D) Government pensioners

Ques: 6

Which of the following is likely to be the most inflationary in its effects?

(A) Repayment of public debt (B) Borrowing from the public to finance a budget deficit (C) Borrowing from the banks to finance a budget deficit (D) Creation of new money to finance a budget deficit

Ques: 7

Which one of the following statements is an appropriate description of deflation?

(A) It is a sudden fall in the value of a currency against other currencies. (B) It is persistent recession in both the financial and real sectors of economy. (C) It is a persistent fall in the general price level of goods and services. (D) It is a fall in the rate of inflation over a period of time.

Ques: 8

Given below are two statements one is labelled as Assertion (A) and other as Reason (R) :

Assertion (A) : The government faces a tough time tackling the bottleneck inflation.
Reason (R) : The situation is due to deficiencies existing in the economy such as supply bottleneck and inefficient distribution.

Select the correct answer from the codes given below.

Codes :

(A) and (R) are true and (R) is correct explanation of

(A)

(A) and (R) are true, but (R) is not correct explanation of (B) (C) is true, but (R) is false (D) is false, but (R) is true

Ques: 9

Core inflation is defined as :

(A) Headline inflation excluding only fuel inflation. (B) Food inflation and fuel inflation. (C) Headline inflation excluding only food inflation. (D) Headline inflation excluding both food inflation and fuel inflation.

Ques: 10

Tick mark which is incorrect about inflation :

(A) Inflation indicates the rise in the price of a basket of commodities on a point-to-point basis. (B) The inflation rate in India is calculated on the basis of the wholesale price index. (C) For some commodities retail price are also considered for measurement of inflation. (D) Inflation rate going down does not mean prices are declining.

Ancient History

Demand and Supply of Money MCQ Practice Questions