KIIT WORLD SCHOOL, PITAMPURA - SESSION 2019-20

CLASS: XII SUBJECT: ECONOMICS

Unit- 2 Money and Banking

Sr. No. Knowledge Based Marks

1 State components of transaction money. 1each
2 What is barter? 1
3 What is a central bank? 1
4 Define CRR, SLR, Bank rate, Open market operation. 1 each.
5 Define bank money. 1
6 Define fiat money. 1
7 What is a commercial bank? 1
8 Define money supply. 1
9 Which are the qualitative monetary measures? 1
10 Mention the quantitative monetary measures available to the central bank 1
11 What is high powered money? 1
12 Which measure of money supply is most liquid and why? 1
13 Currency and coins is also termed as ‘Legal Tender Money’. State true or false 1
with reason.
14 Identify a commercial bank from the following:
a) LIC b) UTI c) SBI d) None of the above
15 Mention any three defects of barter system 3
16 State whether money is stock variable or flow variable.
17 State any three main functions of Central Bank. Describe and one of them 3
18 Define the following: 3
a) Moral suasion
b) Legal Reserve Ratio
c) Bank of issue.
19 Distinguish between Central Bank and Commercial Bank. 3
20 What is a barter system? What are its drawbacks? 3
21 What are the cost associated with lack of double coincidence of wants? 3
22 State whether money is stock variable or flow variable. 3
23 What do you understand by marginal reserve requirements?
S. No. Understanding Based
1 What is meant by double coincidence of wants? 3
2 ‘Legal tender money is also known as fiat money.’ Why? 3
3 How is high powered money (H) different from money (M)? 4
4 Do you consider a commercial bank as ‘creator of money’ in the economy? Give 4
reasons for your answer.
5 Elaborate the following functions of central bank: 4
 Issue of currency
 Banker to the govt .
 Bankers bank and supervisor
 Controller of credit and money supply
 Lender of last resort
 Clearing house
 Custodian of foreign exchange
 Exchange controller
 KIIT WORLD SCHOOL, PITAMPURA - SESSION 2019-20
CLASS: XII SUBJECT: ECONOMICS
6 Define money multiplier. How is the value of multiplier determined? What 4
ratios play an important role in determining the value of money multiplier?
8 Differentiate between commercial bank and central bank. 4
9 How is the value of multiplier determined?
10 What are the monetary policy instruments of central bank for credit control? 4
Application
1 Explain the process of credit creation by commercial banks. With numeric 4
example.
2 State the quantitative and qualitative instruments of controlling quantity of 4
credit.
3 How does RBI control the availability of credit by setting the bank Rate? Explain 4
4 How do commercial banks control the availability of credit by open market 4
operations? Explain
5 Changes in CRR affect credit creation and credit availability. How? 4
6 Calculate and show the working of money creation by commercial banks if 4
Primary deposits is Rs1250crore and LRR is 10%
7 If the money created by the banks is Rs500 and the legal reserve ratio is 20%, 4
find the value of primary deposit?
8 If the money created by the banking system is Rs 1000 and the primary deposit
is Rs250, what is the value of deposit multiplier and the legal reserve ratio?
S.No. HOTS
1 How bank Rate is different from Repo rate and reverse repo rate? 3
2 Differentiate quantitative instruments of credit control from qualitative 3
instruments.
3 Whether the following changes by the Reserve Bank will increase the money 3
supply or decrease the money supply?
a) Rise in CRR
b) Purchase of securities in open market
c) RBI increases the margin from 40% to 60%.
d) RBI reduces the statutory liquidity ratio.
e) Decrease in bank rate.
4 Calculate the legal reserve requirements if initial deposit is Rs1200 crore leads
to creation of total deposits of Rs6000 crore.