Question 1

It implements monetary policy of the country:
A)Central bank
B)Commercial banks
C)Specialized bank
D)Finance department

Accepted Answer

The central bank is responsible for implementing the monetary policy of a country, which includes regulating the money supply and interest rates to achieve economic objectives such as controlling inflation, managing employment levels, and maintaining financial stability.

Question 2

Which property paper money does NOT Possess?
A)Acceptability
B)Divisibility
C)Durability
D)Portability

Accepted Answer

Paper money, while accepted, divisible, and portable, is not particularly durable compared to other forms of money like coins or digital currency. It can easily tear, wear out, or get damaged by water.

Question 3

Anything used as money must be:
A)Fixed in value
B)Fixed in supply
C)Legal tender
D)Readily acceptable

Accepted Answer

Money must be readily acceptable as a medium of exchange for goods and services. While legal tender is often used as money, not all money must be legal tender (e.g., checks or credit). The supply and value of money are not fixed and can fluctuate based on economic conditions.

Question 4

What will promote savings?
A)Increase in credit facilities
B)Increase in taxation
C)Increase in personal incomes
D)Rising prices

Accepted Answer

An increase in personal incomes promotes savings because individuals have more disposable income, which they can choose to save rather than spend.

Question 5

Liquidity of a monetary asset means:
A)Velocity of circulation of money
B)Easy availability of money
C)Ready acceptability of monetary asset
D)The monetary asset has lost it value

Accepted Answer

Liquidity of a monetary asset refers to how quickly and easily it can be converted into cash or used for transactions, which is indicated by its ready acceptability.

Question 6

Barter means:
A)Trade through metallic money only
B)Trade of goods only excluding services
C)Trade of very low value goods
D)Trade without use of money

Accepted Answer

Barter is a system of exchange where goods or services are directly exchanged for other goods or services without the use of money.

Question 7

Government securities:
A)Mean currency
B)Are near money
C)Are bought and sold on stock exchange market
D)(b) and (c) of above

Accepted Answer

Government securities are considered near money because they are highly liquid and can be easily converted into cash, and they are also traded on the stock exchange market.

Question 8

Which is the characteristic of a good money:
A)Has good design
B)Has high value
C)Has a fixed value in gold
D)Is readily accepted by people

Accepted Answer

A characteristic of good money is that it is readily accepted by people for transactions and trade. This acceptability ensures its usefulness as a medium of exchange.

Question 9

This is NOT money
A)Currency
B)Prize bond
C)Demand deposit in a bank
D)Coins

Accepted Answer

Prize bonds are a form of lottery bond, a non-interest bearing security issued on behalf of a government. They do not represent money themselves but are rather a way to invest and potentially win money based on luck. Unlike currency, coins, or demand deposits that directly serve as mediums of exchange, prize bonds are more akin to a gamble or investment.

Question 10

which of the following is true for Cross cheque?
A)Is issued only by a business firm
B)Is not accepted by banks
C)Ensures immediate payment of cash to the holder
D)None of the above

Accepted Answer

Crossed cheques are not restricted to issuance by business firms, can be accepted by banks, and do not ensure immediate cash payment to the holder. They are designed for depositing directly into bank accounts, enhancing security.

Question 11

This is a characteristic of good money:
A)High intrinsic value
B)Liquidity
C)Attractive design
D)Easy to duplicate

Accepted Answer

Liquidity is a characteristic of good money because it means that the money can be easily and quickly converted into goods or services without losing value.

Question 12

This is a characteristic of good money:
A)High intrinsic value
B)General acceptability
C)Attractive design
D)High purchasing power

Accepted Answer

General acceptability is a characteristic of good money because it allows it to be used as a medium of exchange for goods and services.

Question 13

It is a kind of money:
A)Credit money
B)Discredit money
C)Trust money
D)False money

Accepted Answer

Credit money refers to money that is created through the extension of credit, such as bank deposits or loans.

Question 14

It is included in kinds of money:
A)Legal money
B)Credit money
C)Token money
D)All of the above

Accepted Answer

All of the options listed, Legal money, Credit money, and Token money, are included in the kinds of money. Legal money refers to currency that a government has declared to be legal tender. Credit money is money created by the promise of future payment, such as bank deposits. Token money refers to money whose face value is greater than its metal value.

Question 15

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

Accepted Answer

Treasury Bills (T-Bills) are short-term financial instruments issued by the government to finance its short-term liquidity needs. They are considered a secure investment since they are backed by the government's credit.

Question 16

Which does NOT represent a method of payment?
A)Cheque
B)Saving certificate
C)Currency note
D)Bill of exchange

Accepted Answer

Saving certificates are investment tools, not methods of payment. They are designed for saving money over a period, unlike cheques, currency notes, and bills of exchange, which are directly used for transactions.

Question 17

Which is NOT a desirable characteristic of money?
A)Portable
B)Uniform
C)Easily recognized
D)Easily duplicated

Accepted Answer

Easily duplicated is not a desirable characteristic of money because it would make counterfeiting easier, undermining the trust and value of the currency.

Question 18

According to Keynes people demand money for purposes (motives):
A)1
B)2
C)3
D)4

Accepted Answer

Keynes identified three motives for holding money: the transactions motive (money needed for everyday transactions), the precautionary motive (holding money for unexpected expenses), and the speculative motive (holding money to take advantage of future investment opportunities).

Question 19

Speculative demand for money depends upon:
A)Income
B)Investment
C)Rate of interest
D)Central bank

Accepted Answer

Speculative demand for money is primarily influenced by the rate of interest. People hold money for speculative reasons based on their expectations of future changes in interest rates, which affect the opportunity cost of holding money versus bonds.

Question 20

If money supply in a country decrease:
A)Prices will rise
B)Prices will fall
C)Rate of interest falls
D)(b) and (c) of above

Accepted Answer

When the money supply in a country decreases, it generally leads to a decrease in prices because there is less money circulating, reducing demand for goods and services. This deflationary effect can lead to lower prices.

Quiz 4: Money and Monetary Policy: Understanding the Characteristics and Functions of Currency and Government Securities

It implements monetary policy of the country:

Which property paper money does NOT Possess?

Anything used as money must be:

What will promote savings?

Liquidity of a monetary asset means:

Barter means:

Government securities:

Which is the characteristic of a good money:

This is NOT money

which of the following is true for Cross cheque?

This is a characteristic of good money:

This is a characteristic of good money:

It is a kind of money:

It is included in kinds of money:

Treasury Bill is a document used for:

Which does NOT represent a method of payment?

Which is NOT a desirable characteristic of money?

According to Keynes people demand money for purposes (motives) :

Speculative demand for money depends upon:

If money supply in a country decrease: