money supply, banking & financial institutions section 12 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (a)

On the basis of acceptability, money has been classified into legal tender and optional money.

Legal tender money is enforced by law. Optional money is that money that may or may not be accepted as a means of payment; it has no legal sanction.

Different credit instruments, like, cheques, bank drafts, etc., are examples of optional money.

Answer: (d)

A tight monetary policy is a course of action undertaken by the Central bank to constrict spending in an economy, or to curb inflation when it is rising too fast.

The increased bank rate increases the cost of borrowing and effectively reduces its attractiveness.

Answer: (d)

Answer: (d)

When inflation in the economy is low, people expenses decrease and they are able to save more.

When per capital income increases it leads to higher savings in the economy.

The growth of financial intermediaries means financial institutions like banks. An increase in banks in the economy leads to increased saving behaviour.

So, all the statements are true.

Answer: (c)

Factors causing an increase in demand for goods & services:

1. Increase in public expenditure
2. Increase in private expenditure
3. Increase in exports
4. Reduction in taxation
5. Rapid growth of population
6. Black money
7. Deficit financing
8. Cheap money policy
9. Increase in consumer spending
10. Department of Tax internal debts.