Money Chapter 10

Q.1 Which one of the following approaches to the definition of money gives the widest possible
view of money?
A. Central bank approach B. Conventional approach
C. Chicago approach D. Gurley Shaw approach
Q.2 Which of the following is not a function of money?
A. Medium of exchange B. Unit of account
C. Standard of deferred payments D. Stabilization of price level
Q.3 Fiat money refers to:
A. Credit money B. Legal money
C. Full bodied money D. International money
Q.4 Which one of the following is an example of quasi-money or near-money?
A. Bills of exchange B. Cheque
C. Bank notes D. Coins
Q.5 The limited legal-tender money stands for the component of money which:
A. Is issued in a limited amount
B. Is legal tender for payment upto a certain maximum amount
C. Is legal tender in specified areas
D. Is to be used in specific transactions
Q.6 As compared to the classical theory, which function of money was stressed more in the
Keynesian theory?
A. Unit of account B. Medium of exchange
C. Standard of deferred payments D. Store of value
Q.7 The Quantity Theory of Money establishes the relationship between quantity of money in
an economy and the level of:
A. Employment B. National income
C. Prices D. Savings
Q.8 The relationship between the market rate of interest and the market price of a bond is:
A. Inverse B. Direct
C. Positive and proportionate D. Uncertain
Q.9 The degree of elasticity in respect of speculative demand for money, under the liquidity
trap conditions, is:
A. Zero B. One
C. Greater than one D. Infinite
Q.10 A retail price index is a good measure of changes in:
A. Consumers' cost of living
B. General purchasing power of money
C. Average standard of living
D. Patterns of consumer expenditure
Q.11 Which of the following is not an instrument of monetary policy?
A. Taxation B. Bank rate
C. Open-market operations D. Credit rationing

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 Money Chapter 10

Q.12 At a very low rate of interest, the interest-elasticity of the speculative demand for money
becomes:
A. Low B. High
C. Very high D. Infinite
Q.13 The liquidity trap condition occurs at a:
A. Low rate of interest B. Very low rate of interest
C. High rate of interest D. Very high rate of interest
Q.14 According to the classical approach, the demand for money primarily depends upon:
A. Rate of interest B. Economic transactions
C. Speculative activity D. Precautionary motive
Q.15 Which of the following measures is helpful in controlling inflation?
A. Raising the bank rate
B. Price control and rationing of essential goods
C. Reduction of government expenditure
D. All of the above
Q.16 Stagflation refers to a situation which is characterised by:
A. Deflation and rising unemployment
B. Inflation and deflation
C. Sustained price-rise and rising unemployment
D. Stagnant employment and deflation
Q.17 Which statement is true of the relationship between bond prices and bond yields?
A. They vary inversely
B. They vary directly
C. They are not related
D. They are related in long run and not in the short run
Q.18 Out of the following the only recognised legal tender is:
A. Cheque B. Bank notes and coins
C. Bank notes and cheques D. Credit card
Q.19 The money called legal tender includes:
A. Currency notes and credit cards B. Currency notes and bank deposits
C. Currency notes and cheque D. Currency notes and coins
Q.20 Money material should be:
A. Abundant B. Scarce
C. Beautiful D. Heavy
Q.21 If no money is used to exchange goods, it is called:
A. Barter B. Currency
C. Black market D. Free trade
Q.22 Barter has the defect:
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

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 Money Chapter 10
Q.23 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
Q.24 The govt. can control inflation by:
A. Increasing demand for goods B. Increasing supply of goods
C. Increasing money supply D. Decreasing taxes
Q.25 Commercial banks create:
A. Credit money B. Token money
C. Legal money D. Do not create money
Q.26 The most important feature of money:
A. General acceptability B. Convertibility into gold
C. Store of value D. Medium of exchange
Q.27 Paper money came into use:
A. 100 years ago B. 200 years ago
C. 1000 years ago D. 2000 years ago
Q.28 A saving account in a bank represents the function of money:
A. A measure of value B. A medium of exchange
C. A standard for deferred payments D. Store of value
Q.29 A student records her/his income and spending for past month, /Heshe uses the function
of money
A. Medium of exchange B. Standard of deferred payments
C. Store of value D. Unit of account
Q.30 Anything used as money must be:
A. Fixed in value B. Fixed in supply
C. Legal tender D. Readily acceptable
Q.31 What will promote savings?
A. Increase in credit facilities B. Increase in taxation
C. Increase in personal incomes D. Rising prices
Q.32 Treasury Bill is a document used for:
A. A short-term loan to the exporter
B. A long-term loan to the government
C. A short-term loan to the government
D. A short-term loan to a govt. employee
Q.33 Which does NOT represent a method of payment?
A. Cheque B. Saving certificate
C. Currency note D. Bill of exchange
Q.34 In the equation PY = MV showing quantity theory of money. Y represents:
A. Year of measurement of national income
B. National income
C. Tax revenue of the govt
D. (a) and (c) of above

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 Money Chapter 10
Q.35 If quantity of money increases 100%, other things remaining constant, value of money
changes by:
A. Increases by 100% B. Decreases by 100%
C. Decreases by 200% D. Does not change
Q.36 For the economy, prices are beneficial:
A. Falling slowly B. Rising slowly
C. Rising fast D. Falling fast
Q.37 According to Keynes people demand money for purposes (motives):
A. 1 B. 2
C. 3 D. 4
Q.38 It is assumption of quantity theory of money:
A. Quantity of traded goods increases
B. Velocity of circulation of money constant
C. Govt. imposes new taxes
D. (a) and (b) of the above
Q.39 If we put this letter in the blank space, we get quantity theory of money PY = M
A. S B. T
C. V D. A
Q.40 Under normal circumstances, the velocity of circulation of money in a country is:
A. 100% B. Negative
C. Less than 10 D. Zero
Q.41 The quantity demanded of money rises:
A. As the interest rises B. As the interest rate falls
C. As the supply of money falls D. As the number of banks rises
Q.42 Velocity of circulation of money means the number of times a unit of money
A. Changes hands daily B. Changes hands monthly
C. Changes hands annually D. Changes purchasing power
Q.43 Which one is equation of exchange?
A. PT = MV B. PV = MT
C. PM = TV D. None of these
Q.44 What are the necessary conditions of Barter System?
A. Limited Needs B. Limited Exchange Area
C. Economically Backward Society D. All the above
Q.45 What are the advantages of Barter System ?
A. Simple System B. More Mutual Co-operation
C. No Economic Disparities D. All the above
Q.46 Which one is the difficulty of Barter System ?
A. Lack of Double Coincidence
B. Difficulty of Division of the Goods
C. Lack of General Acceptable Measure of Value
D. All the above

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 Money Chapter 10
Q.47 Which is the correct order of money evolution ?
A. Commodity Money, Paper Money, Metal Money
B. Commodity Money, Metal Money, Paper Money, Credit Money
C. Credit Money, Metal Money, Paper Money
D. None of the above
Q.48 Which one is included in the primary function of money ?
A. Medium of Exchange B. Measure of Value
C. Both (a) and (b) D. Store of Value
Q.49 Which one is included in the secondary function of money ?
A. To make Deferred Payments B. Store of Value
C. Transfer of Value D. All of these
Q.50 The function of money is:
A. Medium of Exchange B. Measure of Value
C. Store of Value D. All of the above
Q.51 The functions of money includes:
A. Value determination B. Store of value
C. Means of exchange D. All of these
Q.52 Money is matter which is:
A. a measure of value B. Accepted as a means of exchange
C. used to store wealth D. All of these
Q.53 By supply of money we mean :
A. Money deposited in bank
B. Money available with the public
C. Deposits with post office savings bank
D. All of these
Q.54 Which of the following is not a function of money ?
A. Medium of exchange B. Price stability
C. Store of value D. Unit of account

1 A 2 D 3 B 4 A 5 B 6 D 7 C 8 A 9 D 10 A 11 A 12 D

13 B 14 B 15 D 16 C 17 A 18 B 19 D 20 B 21 A 22 C 23 D 24 B

25 A 26 A 27 B 28 D 29 D 30 D 31 C 32 C 33 B 34 B 35 B 36 B

37 C 38 B 39 C 40 C 41 B 42 C 43 A 44 D 45 D 46 D 47 B 48 C

49 D 50 D 51 D 52 D 53 D 54 B

M. Shoaib PRC 03 - POE