Money And Banking — Practice Quiz
ICSE · Class 12 · Economics
Try a 4-question quiz on Money And Banking for ICSE Class 12 Economics: tap an answer to check it and see why. 70 questions in the full chapter test.
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Quick Quiz: Money And Banking
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A bank receives an initial deposit of ₹12,000 and the legal reserve ratio is 20%. What is the total credit creation by the bank?
High-powered money is ₹4,500 crore and the money multiplier is 3. What is the total money supply?
A bank receives ₹8,000 as initial deposits. If the legal reserve ratio is 25%, what is the total demand deposits created?
Currency held by the public is ₹18,000 crore and demand deposits with banks are ₹42,000 crore. What is the money supply?
Sample Questions
A country has money supply of ₹96,000 crore and high-powered money of ₹16,000 crore. What is the money multiplier?
Show answer
6
Money multiplier m = M/H. So m = 96,000/16,000 = 6.
A bank receives a primary deposit of ₹5,000 and the legal reserve ratio is 10%. How much money can the bank create in total?
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₹50,000
Money multiplier = 1/0.10 = 10. Total credit creation = Initial deposits × Money multiplier = ₹5,000 × 10 = ₹50,000.
At a price of ₹10 per kg of wheat, one rupee buys 100 grams. If the price falls to ₹8 per kg, what does one rupee buy?
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125 grams
Value of money Vm = 1/P. When price falls from ₹10 to ₹8 per kg, purchasing power rises. One rupee buys 1/8 kg = 0.125 kg = 125 grams.
A bank has initial deposits of ₹20,000. If the legal reserve ratio is raised from 20% to 50%, what is the fall in total credit creation?
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₹60,000
At 20% LRR, multiplier = 1/0.2 = 5 and credit creation = ₹20,000 × 5 = ₹100,000. At 50% LRR, multiplier = 1/0.5 = 2 and credit creation = ₹20,000 × 2 = ₹40,000. Fall = ₹100,000 - ₹40,000 = ₹60,000.
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