Bank Theory

MCQs on Money, Money Supply, and Inflation 1. What is the primary function of money? a) To create employment b) To measure temperature c) To act as a medium of exchange d) To increase inflation a) Currency with the public b) Gold reserves in temples c) Demand deposits with banks d) Time deposits 3. Which authority is responsible for regulating money supply in India? a) Ministry of Finance b) Reserve Bank of India (RBI) c) SEBI d) NITI Aayog 4. Inflation refers to: a) Increase in employment b) Decrease in prices c) General rise in prices over time d) Decrease in money supply 5. Demand-pull inflation occurs when: a) Demand exceeds supply b) Supply exceeds demand c) Prices fall rapidly d) Currency is withdrawn 6. Which of the following can cause cost-push inflation? a) Increase in productivity b) D...

Money Supply and Inflation What is Money? Money is anything that is widely accepted as a medium of exchange for goods and services. It also serves as a unit of account, a store of value, and a standard of deferred payment. Modern economies use currency notes and coins, along with digital money, as the most common forms of money. Money Supply Money supply refers to the total stock of money circulating in an economy at a particular point in time. It includes currency held by the public and demand deposits with banks. In India, the Reserve Bank of India (RBI) measures money supply in different categories: M1: Currency with public + demand deposits + other deposits with RBI M2: M1 + savings deposits with Post Office Savings Banks M3: M1 + time deposits with banks (widely used indicator) M4: M3 + total deposits with Post Office Savings Banks (excluding National Savings Certificates) Example: If currency with the public is ₹5,00,000 a...