Question 1: Money acts as a medium of:
a) Consumption
b) Exchange
c) Production
d) Savings
Answer: b) Exchange
Question 2: Which of the following is NOT a function of money?
a) Medium of exchange
b) Store of value
c) Measure of inequality
d) Unit of account
Answer: c) Measure of inequality
Question 3: Which form of money is commonly used for large transactions and acts as a store of value?
a) Currency notes and coins
b) Bank deposits
c) Cheques
d) Credit cards
Answer: b) Bank deposits
Question 4: The Reserve Bank of India (RBI) is responsible for:
a) Issuing currency notes and coins
b) Regulating the functioning of banks
c) Controlling the money supply in the economy
d) All of the above
Answer: d) All of the above
Question 5: Which of the following is NOT a modern form of currency?
a) Barter
b) Credit cards
c) Debit cards
d) Mobile wallets
Answer: a) Barter
Question 6: The central bank of India is:
a) State Bank of India (SBI)
b) Punjab National Bank (PNB)
c) Reserve Bank of India (RBI)
d) Bank of India (BOI)
Answer: c) Reserve Bank of India (RBI)
Question 7: What is the main function of banks in an economy?
a) To issue currency
b) To provide credit
c) To regulate the flow of money
d) To print money
Answer: b) To provide credit
Question 8: Which of the following is an example of formal sources of credit?
a) Moneylenders
b) Friends and relatives
c) Cooperatives
d) Self-help groups (SHGs)
Answer: c) Cooperatives
Question 9: What is collateral?
a) Interest charged on loans
b) Security against a loan
c) Principal amount of a loan
d) A type of credit card
Answer: b) Security against a loan
Question 10: Which of the following is NOT a benefit of formal sources of credit?
a) Lower interest rates
b) Easy availability
c) No paperwork
d) Timely repayment schedule
Answer: c) No paperwork
Question 11: Which of the following is a feature of SHGs (Self-help Groups)?
a) They provide credit to their members
b) They are managed by government officials
c) They operate only in urban areas
d) They charge high-interest rates
Answer: a) They provide credit to their members
Question 12: What is the role of the moneylender in rural areas?
a) Provide easy and affordable credit
b) Follow formal procedures for lending
c) Charge high-interest rates
d) Offer long-term loans
Answer: c) Charge high-interest rates
Question 13: Which of the following is an advantage of borrowing from formal sources of credit?
a) Flexible repayment options
b) High-interest rates
c) No need for collateral
d) No involvement of paperwork
Answer: a) Flexible repayment options
Question 14: Which organization provides loans to small farmers for agricultural activities?
a) Reserve Bank of India (RBI)
b) State Bank of India (SBI)
c) National Bank for Agriculture and Rural Development (NABARD)
d) International Monetary Fund (IMF)
Answer: c) National Bank for Agriculture and Rural Development (NABARD)
Question 15: What is the main drawback of borrowing from informal sources of credit?
a) High-interest rates
b) Lengthy documentation process
c) Low flexibility in repayment
d) Lack of trust
Answer: a) High-interest rates
Question 16: What is the interest rate charged by the RBI for loans to commercial banks known as?
a) Bank rate
b) Repo rate
c) Reverse repo rate
d) Cash reserve ratio (CRR)
Answer: a) Bank rate
Question 17: Which of the following is NOT a type of formal source of credit in rural areas?
a) Cooperative societies
b) SHGs (Self-help Groups)
c) Moneylenders
d) Regional rural banks
Answer: c) Moneylenders
Question 18: What is the main advantage of cooperative societies as a source of credit?
a) High-interest rates
b) Easy availability of loans
c) Lack of collateral
d) Flexible repayment options
Answer: b) Easy availability of loans
Question 19: Which term refers to the process of taking a loan from one lender to pay off debts owed to multiple lenders?
a) Collateral
b) Repayment
c) Refinancing
d) Mortgage
Answer: c) Refinancing
Question 20: What is the main function of credit in an economy?
a) To generate income
b) To increase inflation
c) To reduce the money supply
d) To regulate prices
Answer: a) To generate income
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