List of top Economics Questions on Money and Banking asked in CBSE CLASS XII

Read the following text carefully:
“The Reserve Bank of India (RBI) announced a 50 basis point Repo Rate cut to 5.50% from 6%.”
In the light of the given text and common understanding, answer the following questions:

• [(i)] Identify the economic issue indicated in the above text.
• [(ii)] Explain the likely causes and consequences of this step of RBI on the economy.

“When initial deposits in the credit creation process remains same, the total amount of credit created rises as the value of money multiplier increases.” Defend or refute the above statement with the help of hypothetical numerical example. OR “Central Bank maintains reserves of all commercial banks and use to settle interbank claims.” Do you agree with the given statement? Give valid explanation in support of your answer.

Explain the `Banker to the Government' function of the Central Bank.

Explain the concept of `Deflationary Gap' with the help of a diagram.

Calculate `Compensation of Employees' (COE) from the following data :

If the Legal Reserve Ratio (\(LRR\)) is 20%, the Money Multiplier will be:

Which of the following is NOT a function of the Central Bank?

Supply of money refers to:

Ms. Reeta D’Costa, retired from the post of Income Tax Commissioner in the year 2023.
Apart from her pension, she also receives the following from various sources: - Rental income from a flat she owns.
- Interest income from her fixed deposits.
- Money sent by her children settled abroad.
Identify and classify her monthly incomes into 'factor income' and 'transfer income', with valid reasons.

Read the following statements: Assertion and Reason (R). Choose the correct option from those given below:
% Assertion Assertion : Money is of perishable nature and is generally accepted by all at any point of time.
% Reason (R) Reason (R): Money serves as a store of value, facilitating individuals to transfer purchasing power from the present to the future.

Read the following statements: Assertion and Reason (R). Choose the correct option from those given below:
Assertion : Unilateral Transfers are recorded in the Current Account of the Balance of Payments (BoP) of a nation.
Reason (R): Capital account records transactions which cause a change in the assets or liabilities of the country.

Read the following statements carefully:
Statement 1: Final goods are those goods which normally lose their identity in the production process.
Statement 2: Final goods may get transformed during the consumption process by a consumer.

Suppose in an economy, primary deposits are ₹ 500, if the Reserve Ratio is 25\%. Estimate the total deposits created and the total lending by the banking system.

Justify the following statements with valid arguments:
(i) Money supply in an economy is an example of a stock variable.
(ii) The Central Bank provides several Banking services to the government.

Commercial banks are regarded as money creators because: (Choose the correct option)

Fill in the blank:
............... releases data of money supply in India. (Choose the correct option to fill in the blank)

Read the following text carefully:
\textit{``This function of money provides different items to be evaluated against a common standard. It allows comparison of prices and keeping financial records.''}
(i) On the basis of the given text, identify the indicated function of money.
(ii) List any other two functions of money.

Elaborate the process of Credit Creation using a suitable numerical example.

State the formula to compute Credit Multiplier.

State the meaning and components of M1 measure of money supply.