Microeconomics-II

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  • CBCS
    IV SEMESTER;
    DEPARTMENT OF ECONOMICS;
    OBJECTIVES
    NAME OF THE PAPER: MACROECONOMICS -II
    PAPER IV
    SECTION A
    MULTIPLE CHOICE QUESTIONS (200X1=200)
    MODULE-I : MONEY
    A. Choose the correct answer:
    1. The value of money in Fisher’s equation is determined by
    (a) Demand for money ( )
    (b) Supply of money ( )
    (c) Demand and supply of money ( )
    (d) None of the above ( )
    2. According to the Quantity Theory of Money, the value of money depends upon
    (a) Quantity theory of money in circulation ( )
    (b) Purchasing power of money ( )
    (c) Demand for money ( )
    (d) Price level ( )
    3. According to Cambridge equation, the value of money depends upon
    (a) Demand for money ( )
    (b) Supply of money ( )
    (c) Demand for goods and services ( )
    (d) All of the above ( )
    4. The degree of relationship between the demand for and the supply of money in Fisher’s
    equation will be
    (a) 𝑠𝑢𝑝𝑝𝑙𝑦 > 𝑑𝑒𝑚𝑎𝑛𝑑 ( )
    (b) 𝑠𝑢𝑝𝑝𝑙𝑦 = 𝑑𝑒𝑚𝑎𝑛𝑑 ()
    (c) 𝑠𝑢𝑝𝑝𝑙𝑦 < 𝑑𝑒𝑚𝑎𝑛𝑑 ( )
    (d) None of the above ( )

    Page 1

  • 5. Which is not the function of money
    (a) Make demand and supply equal ()
    (b) Store of value ( )
    (c) Medium of exchange ( )
    (d) Measure of value ( )
    6. High-powered money is also known as
    (a) Base money ( )
    (b) Reserve money ( )
    (c) Narrow money ( )
    (d) All of the above ()
    7. Who stated, “Bad money drives good money out of circulation, when both of them are
    full legal tender”?
    (a) Irving Fisher ( )
    (b) Milton Friedman ( )
    (c) J.M. Keynes ( )
    (d) Thomas Gresham ( )
    8. Value of money is
    (a) Directly related to the price level ( )
    (b) Inversely related to the price level ()
    (c) Proportionately related to the price level ( )
    (d) All the above ( )
    9. Who stated, “Money is what money does”?
    (a) Milton Friedman ( )
    (b) Walker ( )
    (c) Irving Fisher ( )
    (d) Thomas Gresham ( )
    10. Fisher’s cash transaction equation is expressed as
    (a) 𝑃 =
    𝑀𝑉
    𝑇
    ()
    (b) 𝐾 =
    𝑀
    𝑃𝑇
    ( )
    (c) 𝑉 =
    𝐼
    𝐾
    ( )
    (d) 𝑃 =
    𝑀
    𝐾𝑇
    ( )
    11. Barter system means
    (a) Purchase of commodity with money ( )
    (b) Sale of commodity with money ( )
    (c) Purchase and sale of commodity with commodity ()

    Page 2

  • (d) None of the above ( )
    12. Which among the following is considered to be the most liquid asset?
    (a) Gold ( )
    (b) Money ()
    (c) Land ( )
    (d) Treasury bonds ( )
    13. Currency notes and coins are called as:
    (a) flat money ( )
    (b) legal tenders ( )
    (c) Fiat money ( )
    (d) Both (b) and (c ) ()
    14. Convertible money means
    (a) It can buy goods ( )
    (b) Government can give gold against it ()
    (c) Illegal money ( )
    (d) Low value of money ( )
    15. Barter system has the defect of
    (a) Goods exchanged are of inferior quality ( )
    (b) Goods cannot be exchanged for services ( )
    (c) Lack of common measure of value ()
    (d) None of the above ( )
    16. Legal money is called so because
    (a) The buyer must pay in that money ( )
    (b) Can be converted into gold ( )
    (c) Sellers do not accept any other money ( )
    (d) It is official medium of exchange ()
    17. The most important feature of money is
    (a) General acceptability ()
    (b) Convertibility into gold ( )
    (c) Store of value ( )
    (d) Medium of exchange ( )
    18. Which property the paper money does not possess:
    (a) acceptability ( )
    (b) Divisibility ( )
    (c) Durability ()

    Page 3

  • (d) Portability ( )
    19. In the equation 𝑀𝑉 = 𝑃𝑌, 𝑉 𝑟𝑒𝑝𝑟𝑒𝑠𝑒𝑛𝑡𝑠
    (a) Value of money ( )
    (b) Velocity of circulation of money ( )
    (c) Variation of national income ( )
    (d) All of the above ( )
    20. In the equation 𝑀𝑉 = 𝑃𝑌, 𝑀 𝑟𝑒𝑝𝑟𝑒𝑠𝑒𝑛𝑡𝑠
    (a) Money supply ()
    (b) Money demand ( )
    (c) Maximum output ( )
    (d) Minimum output ( )
    21. According to Keynes, motives for holding money are
    (a) Two ( )
    (b) Three ()
    (c) Four ( )
    (d) Five ( )
    22. Under normal circumstances, the velocity of circulation of money in a country is
    (a) 100 % ( )
    (b) Negative ( )
    (c) Less than 10 ()
    (d) Zero ( )
    23. Paper money is called fiat money because
    (a) It is issued with authority of government ()
    (b) It is convertible into gold ( )
    (c) It can be easily printed ( )
    (d) It is light weight ( )
    24. Value of money means
    (a) Gold purchased by money ( )
    (b) General Purchasing power of money ()
    (c) Importance of money ( )
    (d) Demand for money ( )
    25. If the quantity of money increases 100%, other things remaining constant, value of
    money changes by
    (a) Increases by 100 % ( )
    (b) Decreases by 100 % ()

    Page 4

  • (c) Decreases by 200% ( )
    (d) Does not change ( )
    26. Value of money and supply of money are related
    (a) Inversely ()
    (b) Directly ( )
    (c) Are not related ( )
    (d) None of the above ( )
    27. The quantity demanded of money rises
    (a) As the interest rises ( )
    (b) As the interest falls ()
    (c) As the supply of money falls ( )
    (d) As the numberof banks rises ( )
    28. Equation of exchange is associated with
    (a) Pigou ( )
    (b) J.B.Say ( )
    (c) Marshall ( )
    (d) Irving Fisher ()
    29. Equation of exchange is converted into the quantity theory of money by assuming the
    following variables as constants
    (a) V and T ()
    (b) M and V ( )
    (c) M and P ( )
    (d) V and P ( )
    30. Fisher equation of exchange states that
    (a) P varies directly with income ( )
    (b) P varies directly with M ()
    (c) P and M are constants ( )
    (d) None of the above ( )
    31. In the Fisher’s extended equation of exchange M
    I
    V
    I
    represents
    (a) Credit money ()
    (b) Primary money ( )
    (c) Both primary and credit money ( )
    (d) General Price level ( )
    32. In Fisher’s transaction velocity model, which one of the following is not an assumption
    (a) Velocity of circulation of money is constant ( )

    Page 5

  • (b) The volume of transaction is constant ( )
    (c) Full employment ( )
    (d) P is considered as an active factor ()
    33. The cash balance equation 𝑀 = 𝐾𝑃𝑌 was given by
    (a) Keynes ( )
    (b) Pigou ( )
    (c) Robertson ( )
    (d) Marshall ()
    34. Robertson’s version of the Cambridge equation is
    (a) 𝑃 =
    𝑀
    𝐾𝑇
    ()
    (b) 𝑃 =
    𝐾𝑅
    𝑀
    ( )
    (c) 𝑀𝑉 = 𝑃𝑇 ( )
    (d) 𝑀 =
    𝐾𝑃
    𝑌
    ( )
    35. Pigou’s version of Cambridge equation is
    (a) 𝑃 =
    𝑀
    𝐾𝑇
    ( )
    (b) 𝑃 =
    𝐾𝑅
    𝑀
    ()
    (c) 𝑀𝑉 = 𝑃𝑇 ( )
    (d) 𝑀 =
    𝐾𝑃
    𝑌
    ( )
    36. The quantity theory of money was restated by
    (a) Alfred Marshall ( )
    (b) Milton Friedman ()
    (c) Irving Fisher ( )
    (d) JM. Keynes ( )
    37. Fisher’s equation of exchange considers money as
    (a) A medium of exchange ()
    (b) A store of value ( )
    (c) Measures of value ( )
    (d) All of the above ( )
    38. Robertson’s equation of exchange considers money as
    (a)A medium of exchange ( )
    (b)A store of value ()
    (c)Measures of value ( )
    (d) All of the above ( )

    Page 6

  • 39. The number of times a unit of money exchanges hands during a unit period of time is
    known as
    (a) Velocity of the circulation of money ()
    (b) Speed of circulation of money ( )
    (c) Momentum of circulation of money ( )
    (d) Count of circulation of money ( )
    40. In India, coins are minted at four places, which among the following is one of them
    (a) New Delhi ( )
    (b) Chennai ( )
    (c) Hyderabad ()
    (d) All of them ( )
    ANSWER KEY
    (UNIT-I)
    Question No.
    Answer Key
    1.
    C
    2.
    A
    3.
    A
    4.
    B
    5.
    A
    6.
    D
    7.
    D
    8.
    B
    9.
    B
    10.
    A
    11.
    C
    12.
    B
    13.
    D
    14.
    B
    15.
    C
    16.
    D
    17.
    A
    18.
    C
    19.
    B
    20.
    A
    21.
    B
    22.
    C
    23.
    A

    Page 7

  • 24.
    B
    25.
    B
    26.
    A
    27.
    B
    28.
    D
    29.
    A
    30.
    B
    31.
    A
    32.
    D
    33.
    D
    34.
    A
    35.
    B
    36.
    B
    37.
    A
    38.
    B
    39.
    A
    40.
    C
    B. FILL IN THE BLANKS
    1. Cash -Balance approach is also known as _______
    2. Bad money drives good money out of circulation when both of them are___________.
    3. Paper currency standard is also referred to as___________.
    4. The proportion of real income which the people desire to hold in the form of money is
    called_______.
    5. The cash transaction equation in the present form has been formulated by_________.
    6. When standard money or coins are madeof only one metal, it is referred to ________.
    7. When two kinds of metals are used for minting standard coins, it is called __________.
    8. If mix metals are adopted in the coinage system meant for standard money, it is
    referred to as __________.
    9. The type of standard money used in a monetary system is referred to as _________.
    10. In Cambridge equation, the value of money depends upon_________
    11. Fisher’s equation assumes _____________
    12. Fisher’s equation considers a period of time which is _____________ in nature.
    13. If the volume of credit instruments decreases, the supply of money _________.
    14. In Fisher’s equation ′𝑉′ refers to __________.

    Page 8

  • 15. If the velocity of circulation of money increases, the supply of money will__________.
    16. ‘K’ in Cambridge equation symbolizes a function of _______.
    17. The value of money varies __________with the purchasing power of money.
    18. The value of money varies _________with the price level.
    19. In Fisherian equation, ‘P’ refers to the price level of ___________________.
    20. _________ is the sum of commercial bank reserves and currency (notes and coins) held
    by the public.
    Answers to Fill in the Blanks:
    1. The Demand Theory of Money
    2. legal tender”.
    3. managed currency standard.
    4. cash balance.
    5. Fisher.
    6. monometallism.
    7. bimetallism.
    8. symmetallism.
    9. monetary standard.
    10. demand for money
    11. full employment.
    12. long period in nature.
    13. decreases.
    14. a period of time.
    15. increase.
    16. time.
    17. directly
    18. inversely
    19. both final and intermediate goods.
    20. Highpowered money

    Page 9

  • MODULE-II: BANKING
    A. Choose the correct answer:
    1. Which of the following is a qualitative or selective method of credit control by the
    central bank?
    (a) Bank rate or Discount Rate Policy ( )
    (b) Open market operations ( )
    (c) Cash Reserve Ratio ( )
    (d) None of the above ( )
    2. In what way the Central Bank serves as a Banker’s Bank?
    (a) By maintaining gold reserve ( )
    (b) By controlling currency ( )
    (c) By acting as a lender of the last resort ()
    (d) By reducing the interest rates ( )
    3. Which of the following is not a function of commercial bank?
    (a) Accepting deposits ( )
    (b) Creating credits ( )
    (c) Printing bank notes ()
    (d) None of the above ( )
    4. Reserve Bank of India(RBI) was established on
    (a) 1
    st
    April,1925 ( )
    (b) 1
    st
    April 1935 ()
    (c) 1
    st
    April 1945 ( )
    (d) 1
    st
    April 1955 ( )
    5. Primary deposit in a commercial bank is called
    (a) Active deposit ( )
    (b) Passive deposit ()
    (c) Derivative deposit ( )
    (d) All of the above ( )
    6. Derivative deposit in a commercial bank is also called
    (a) Active deposit ( )
    (b) Passive deposit ( )
    (c) Primary deposit ( )
    (d) None of the above ( )
    7. Bank rate is
    (a) The rate of interest charged by banks on their loans ( )

    Page 10

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