Economics: Money and Credit

Topics in this chapter

• Money and Exchange
• Bank Deposits and Credit
• Formal and Informal Credit
• Terms and Risks of Credit
• RBI and Credit Supervision
• Rural Credit and Self-Help Groups

Cheat sheet

Practice questions

1. Question 1Q-516259

   Why is money accepted as a medium of exchange?

   1. A.It has intrinsic metal value.
   2. B.It is authorized by the government of the country.
   3. C.It can be easily converted into gold.
   4. D.It is issued by commercial banks.
   See the answer and solution
2. Question 2Q-A1BB28

   What does the double coincidence of wants mean?

   1. A.Both parties must agree to use credit cards.
   2. B.Both parties have to sell and buy the same commodity.
   3. C.What a person desires to sell is exactly what the other person wishes to buy.
   4. D.The government and the bank both approve the transaction.
   See the answer and solution
3. Question 3Q-4D2B3B

   What is the main source of income for commercial banks?

   1. A.The interest charged by banks on loans is higher than what they pay on deposits.
   2. B.The government grants subsidies directly to banks.
   3. C.Fees collected for opening savings accounts.
   4. D.Interest earned from keeping cash reserves with the RBI.
   See the answer and solution
4. Question 4Q-CF94F9

   Which of the following institutions is responsible for supervising the functioning of formal sources of loans in India?

   1. A.State Bank of India
   2. B.Ministry of Finance
   3. C.Reserve Bank of India
   4. D.NABARD
   See the answer and solution
5. Question 5Q-18A1FB

   What is collateral in the context of borrowing?

   1. A.An agreement to repay the loan within a fixed time.
   2. B.An asset that the borrower owns and uses as a guarantee to a lender until the loan is repaid.
   3. C.The interest rate charged by the informal sector.
   4. D.A document proving employment status.
   See the answer and solution