Chapter Exam

Chapter 5: Monetary Economics — Online MCQ Test

Q: Which of the following is a primary function of money?

Answer: A. Store of value — Money acts as a store of value because it can preserve purchasing power for future use. This is one of its main functions in an economy.

Q: Which of the following is NOT a form of money?

Answer: D. Capital goods — Capital goods are used in production, not as money. The other options are different forms of money used in exchange.

Q: The demand for money mainly arises because money is used for

Answer: B. Purchasing goods and services — People demand money primarily to make transactions for goods and services. This is the most basic reason for holding money.

Q: If the money supply increases faster than real output, the likely result under the quantity theory of money is

Answer: C. Inflation — According to the quantity theory, an increase in money supply without a matching increase in output leads to a rise in the general price level. This is inflation.

Q: Which one of the following is the correct full form of M3 in money supply measurement in India?

Answer: B. M1 plus net time deposits with banks — M3 includes M1 plus net time deposits with banks. It is a broader measure of money supply used in monetary analysis.

ECONOMICS · CLASS 12th · Tamil Nadu State Board

Practice Chapter 5: Monetary Economics with a free chapter-wise online MCQ test for Tamil Nadu State Board CLASS 12th ECONOMICS. This chapter covers: Deals with the functions and forms of money how money supply is measured and controlled and the factors driving demand for money. It introduces the quantity theory of money and the.... AI-generated questions from basic to board-exam level, with instant results and explanations.

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Chapter 5: Monetary Economics — Important Questions & Answers (FAQ)

Frequently asked questions from Tamil Nadu State Board CLASS 12th ECONOMICS — Chapter 5: Monetary Economics, with answers and explanations. These are sample questions; the exam has its own separate question set.

Which of the following is a primary function of money?

A. Store of value ✓
B. Creation of goods
C. Production of services
D. Distribution of income

Answer: A. Store of value
Money acts as a store of value because it can preserve purchasing power for future use. This is one of its main functions in an economy.

Which of the following is NOT a form of money?

A. Metallic money
B. Paper money
C. Credit money
D. Capital goods ✓

Answer: D. Capital goods
Capital goods are used in production, not as money. The other options are different forms of money used in exchange.

The demand for money mainly arises because money is used for

A. Investment in shares
B. Purchasing goods and services ✓
C. Increasing national wealth automatically
D. Reducing population growth

Answer: B. Purchasing goods and services
People demand money primarily to make transactions for goods and services. This is the most basic reason for holding money.

If the money supply increases faster than real output, the likely result under the quantity theory of money is

A. Deflation
B. A fall in prices
C. Inflation ✓
D. No change in prices

Answer: C. Inflation
According to the quantity theory, an increase in money supply without a matching increase in output leads to a rise in the general price level. This is inflation.

Which one of the following is the correct full form of M3 in money supply measurement in India?

A. M1 plus time deposits with post office savings banks
B. M1 plus net time deposits with banks ✓
C. Currency with the public only
D. Demand deposits with banks only

Answer: B. M1 plus net time deposits with banks
M3 includes M1 plus net time deposits with banks. It is a broader measure of money supply used in monetary analysis.

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Chapter 6: Banking