Chapter Exam

Unit 9: Money Banking and Inflation — Online MCQ Test

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

Answer: A. Medium of exchange — Money acts as a medium of exchange, making transactions easier by removing the need for barter.

Q: Who issues currency notes in India?

Answer: B. Reserve Bank of India — The Reserve Bank of India has the sole authority to issue currency notes in India, except the one-rupee note and coins.

Q: If a bank keeps only a part of deposits as cash and lends the rest, the major economic effect is:

Answer: B. Increase in credit creation — By lending a part of the deposits, banks create additional credit in the economy through the credit multiplier process.

ECONOMICS · CLASS 11 INTERMEDIATE 1 YEAR · Telangana State Board

Practice Unit 9: Money Banking and Inflation with a free chapter-wise online MCQ test for Telangana State Board CLASS 11 INTERMEDIATE 1 YEAR ECONOMICS. This chapter covers: Focusing on financial systems this chapter details money functions commercial bank functions Reserve Bank of India monetary policy inflation types causes effects and control measur.... AI-generated questions from basic to board-exam level, with instant results and explanations.

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Unit 9: Money Banking and Inflation — Important Questions & Answers (FAQ)

Frequently asked questions from Telangana State Board CLASS 11 INTERMEDIATE 1 YEAR ECONOMICS — Unit 9: Money Banking and Inflation, 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. Medium of exchange ✓
B. Producer of goods
C. Measure of population
D. Control of weather

Answer: A. Medium of exchange
Money acts as a medium of exchange, making transactions easier by removing the need for barter.

Who issues currency notes in India?

A. State Bank of India
B. Reserve Bank of India ✓
C. NITI Aayog
D. Ministry of Commerce

Answer: B. Reserve Bank of India
The Reserve Bank of India has the sole authority to issue currency notes in India, except the one-rupee note and coins.

Which of the following is a function of money as a unit of account?

A. It helps in measuring the value of goods and services ✓
B. It stores goods in warehouses
C. It directly produces wealth
D. It replaces all taxes

Answer: A. It helps in measuring the value of goods and services
Money serves as a unit of account because prices and values are expressed in monetary terms.

If a bank keeps only a part of deposits as cash and lends the rest, the major economic effect is:

A. Reduction in credit creation
B. Increase in credit creation ✓
C. Elimination of deposits
D. Fall in money circulation to zero

Answer: B. Increase in credit creation
By lending a part of the deposits, banks create additional credit in the economy through the credit multiplier process.

Which of the following is the best explanation for why inflation may continue even after demand is controlled in some cases?

A. Because all inflation is always caused only by money supply
B. Because cost increases may keep pushing prices upward ✓
C. Because prices never change once they rise
D. Because banks stop functioning during inflation

Answer: B. Because cost increases may keep pushing prices upward
Even if demand falls, rising costs of production can continue to push prices upward, leading to persistent inflation.