Money and Banking Class 12 MCQ Quiz – Test Your Understanding!

Are you ready to test your knowledge of Money and Banking from the Class 12 Economics syllabus? This chapter explains the functions of money, the role of the central bank, and the credit creation process in an economy. Understanding these concepts is crucial for CBSE board exams and competitive exams.

About the Quiz

Chapter Name: Money and Banking
Subject: Economics
Book: NCERT Class 12 Economics
Question Type: Multiple Choice Questions (MCQs)
Leaderboard: Yes (Check Your Rank!)

Why Take This Quiz?

✔ Helps in CBSE board exam revision
✔ Strengthens understanding of monetary policy and banking system
✔ Enhances knowledge of RBI’s role in regulating money supply
✔ Track your progress with the leaderboard

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Chapter 2 Money and Banking

1 / 15

Which of the following statements about the money supply is correct?

Currency notes and coins are not part of the money supply.

Money supply is measured over a period of time.

M1 is a broader measure, while M3 is a narrower measure of money supply.

M1 is a narrow measure, and M3 is a broader measure of money supply.

2 / 15

Supply of money refers to the quantity of money

During any specified period of time

As on 31st March

During a fiscal year

As on any point of time

3 / 15

Demand Deposits include______ and _________. (Fill up the blank with the correct alternative)

Saving account deposits

Fixed deposits

Current Account Deposits

Post Office Savings

2 and 3

1 and 4

1 and 2

1 and 3

4 / 15

Which of the following formulae is INCORRECT?

M3 = M2 + net time deposits of commercial banks

M1 = currency + net demand deposits

M2 = M1 + savings with post office savings banks

M4 = M3 + total deposits with post office savings banks

5 / 15

Read the following statements -Assertion (A) and Reason(R). Choose one of the correct alternatives given below:

Assertion (A): Demand Deposits are considered a convenient mode of payment for the execution of even high-value transactions.

Reason(R): Demand Deposits are non-withdrawable in nature and cannot be withdrawn against the issue of cheques and other similar instruments of payment.

Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).

Assertion (A) is false but Reason (R) is true.

Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Assertion (A) is true but Reason (R) is false.

6 / 15

Identify which of the following is not a function of the Reserve Bank of India? (Choose the correct alternative)

To issue coins and one rupee note

To act as the custodian of the gold reserve of India

To act as the banker to the Government of India.

To act as the financial advisor to the Government of India

7 / 15

A bank ‘run’ occurs when a large number of customers of a bank withdraw their deposits simultaneously. This can cause a bank to become insolvent if it cannot pay back all the depositors. Which of the following facts about a bank make a bank run possible?

Banks have to pay a specific amount to the person in whose name a cheque has been issued.

Banks charge a higher interest rate on loans than what they offer on deposits.

Banks hold only about 15% of their deposits as cash. The rest of the deposits are given out as loans.

Banks pay an amount to account holders as interest on deposits.

8 / 15

Which of the following agency is responsible for issuing ₹ 1 currency notes in India?

Reserve Bank of India.

Niti Aayog

Ministry of Commerce

Ministry of Finance

9 / 15

Money can be used to transfer purchasing power from the present to the future. Which specific function of money is this called?

medium of exchange

store of value

double coincidence of wants

unit of account

10 / 15

Money supply in India may increase if, ________________(Choose the correct alternative)

Reserve Bank of India(RBI) injects more money into circulation

Commercial banks expand their credit operation

Tax rates are reduced by the Central Government

Reserve Bank of India increases the Bank Rate

1, 2, and 4 are correct

2, 3, and 4 are correct

1, 3, and 4 are correct

1, 2, and 3 are correct

11 / 15

Which of the following is not a Quantitative Method of credit control?

Variable Reserve Ratio

Bank Rate Policy

Open Market Operation

Margin Requirements

12 / 15

Read the following statements carefully and choose the correct alternative from the following:

Statement 1 – Demonetization was the step taken by the Government of India in order to tackle the problems of corruption, black money, terrorism, and circulation of fake currency in the Indian Economy.

Statement 2 – Demonetization has ensured improved tax compliance in India over the period of time.

Statement 2 is true and Statement 1 is false

Statement 1 is true and Statement 2 is false

Both statements are false.

Both statements are true.

13 / 15

Find the missing figures and choose the correct alternative:

Round	Deposits	Loans (80%)	Reserve Ratio (20%)
I	1,000	800	200
II	800	...(i)...	160


Total	...(ii)...	...(iii)...	...(iv)...

640, 1000, 4000, 5000

960, 5000, 4000, 1000

640, 5000, 4000, 1000

640, 4000, 1000, 5000

14 / 15

Read the following statements carefully and choose the correct alternatives given below:

Statement 1 – The value of the money multiplier is determined by the reserve ratio prevailing in the monetary system.

Statement 2 – The process of credit creation directly relates to the value of the reserve ratio.

b. Both statements are false.

c. Statement 1 is true and Statement 2 is false

a. Both statements are true.

d. Statement 2 is true and Statement 1 is false

15 / 15

If the legal reserve requirement (LRR) is 20%, what is the value of the money multiplier?

Your score is

The average score is 70%

Leaderboard – Top Scorers

Check the top scorers here!

Pos.	Name	Score	Duration	Points
1	Akshath	100 %	2 minutes 21 seconds	15
2	..b	93 %	2 minutes 20 seconds	14
3	aha	87 %	2 minutes 57 seconds	13
4	Harshit pandey	87 %	3 minutes 34 seconds	13
5	harshit pandey	87 %	4 minutes 35 seconds	13
6	Devashree	87 %	4 minutes 42 seconds	13
7	Rahu	87 %	7 minutes 35 seconds	13
8	R	80 %	3 minutes 31 seconds	12
9	hemi	80 %	4 minutes 22 seconds	12
10	Ananyah	80 %	4 minutes 43 seconds	12
11	harshit pandey	80 %	5 minutes 43 seconds	12
12	sahil	80 %	5 minutes 59 seconds	12
13	yash	80 %	7 minutes 9 seconds	12
14	Maggi	73 %	3 minutes 47 seconds	11
15	jnv jammu 2	73 %	4 minutes 24 seconds	11
16	Akshath	73 %	7 minutes 16 seconds	11
17	Atul	73 %	7 minutes 17 seconds	11
18	Aparna	67 %	7 minutes 15 seconds	10
19	Amrin shaji	60 %	4 minutes 59 seconds	9
20	mani sir	60 %	6 minutes 43 seconds	9
21	Shreya	60 %	6 minutes 51 seconds	9
22	aakash	60 %	8 minutes 28 seconds	9
23	Sharfraz khan	60 %	3 hours 10 minutes 42 seconds	9
24	raja	53 %	3 minutes 13 seconds	8
25	Dhruv (eco topper anta)	53 %	3 minutes 40 seconds	8
26	Zzz	53 %	4 minutes 17 seconds	8
27	Jayashree	47 %	2 minutes 57 seconds	7
28	Arshnoor	40 %	1 minutes 36 seconds	6
29	Gargi	40 %	3 minutes 3 seconds	6
30	Saumyasingh	40 %	8 minutes 2 seconds	6

Key Topics Covered in the Quiz

✔ Functions of Money – Medium of exchange, Store of value, Unit of account
✔ Money Supply & Its Measures (M1, M2, M3, M4)
✔ Functions of Commercial Banks – Credit creation process
✔ Role of the Reserve Bank of India (RBI) – Monetary policy tools (CRR, SLR, Repo Rate, Reverse Repo Rate)
✔ Instruments of Credit Control – Quantitative & Qualitative methods

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Also See: Important Questions and Answers on Liberalization, Privatization, and Globalization for Class 12 Economics Board Exams

About the Quiz

Why Take This Quiz?

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Key Topics Covered in the Quiz

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