MCQ for CA Intermediate FMECO - SECTION B - ECONOMICS FOR FINANCE - Chapter 3 - MONEY MARKET

Sample Multiple Choice Questions (MCQ's) for CA Intermediate - Paper 8 - FINANCIAL MANAGEMENT & ECONOMICS FOR FINANCE - SECTION B - ECONOMICS FOR FINANCE - Chapter 3: MONEY MARKET - For Practice relevant for May/November 23 Examinations

 

UNIT 1: THE CONCEPT OF MONEY DEMAND: IMPORTANT THEORIES

Q1. Choose the incorrect statement

  1. Anything that would act as a medium of exchange is money
  2. Money has generalized purchasing power and is generally acceptable in settlement of all transactions
  3. Money is a totally liquid asset and provides us with means to access goods and services
  4. Currency which represents money does not necessarily have intrinsic value.

Answer: 1

Q2. Money performs all of the three functions mentioned below, namely

  1. medium of exchange, price control, store of value
  2. unit of account, store of value , provide yields
  3. medium of exchange, unit of account, store of value
  4. medium of exchange, unit of account, income distribution

Answer: 3

Q3. Demand for money is 

  1. Derived demand
  2. Direct demand
  3. Real income demand
  4. Inverse demand 

Answer: 1

Q4. Higher the ----------------------, higher would be -----------------------of holding cash and lower will be the -------------------------------- 

  1. demand for money, opportunity cost, interest rate
  2. price level , opportunity cost, interest rate
  3. real income , opportunity cost, demand for money
  4. interest rate, opportunity cost, demand for money

Answer: 4

Q5. The Cambridge approach to quantity theory is also known as

  1. Cash balance approach
  2. Fisher’s theory of money
  3. Classical approach
  4. Keynesian Approach

Answer: 1

 

UNIT 2: CONCEPT OF MONEY SUPPLY

Q1. Reserve money is also known as

  1. central bank money
  2. base money
  3. high powered money
  4. all the above

Answer: 4

Q2. Choose the correct statement from the following

  1. Money is deemed as something held by the public and therefore only currency held by the public is included in money supply.
  2. Money is deemed as something held by the public and therefore inter-bank deposits are included in money supply.
  3. Since inter-bank deposits are not held by the public, therefore interbank deposits are excluded from the measure of money supply. 
  4. Both (a ) and (c) above.

Answer: 3

Q3. Reserve Money is composed of 

  1. currency in circulation + demand deposits of banks (Current and Saving accounts) + Other deposits with the RBI.
  2. currency in circulation + Bankers’ deposits with the RBI + Other deposits with the RBI.
  3. currency in circulation + demand deposits of banks + Other deposits with the RBI.
  4. currency in circulation + demand and time deposits of banks + Other deposits with the RBI.

Answer: 2

Q4. M1 is the sum of

  1. currency and coins with the people + demand deposits of banks (Current and Saving accounts) + other deposits of the RBI. 
  2. currency and coins with the people + demand and time deposits of banks (Current and Saving accounts) + other deposits of the RBI.
  3. currency in circulation + Bankers’ deposits with the RBI + Other deposits with the RBI
  4. none of the above

Answer: 1

Q5. Under the’ minimum reserve system’ the central bank is

  1. empowered to issue currency to any extent by keeping an equivalent reserve of gold and foreign securities.
  2. empowered to issue currency to any extent by keeping only a certain minimum reserve of gold and foreign securities.
  3. empowered to issue currency in proportion to the reserve money by keeping only a minimum reserve of gold and foreign securities.
  4. empowered to issue currency to any extent by keeping a reserve of gold and foreign securities to the extent of ` 350 crores

Answer: 2

Q6. The primary source of money supply in all countries is

  1. the Reserve Bank of India
  2. the Central bank of the country
  3. the Bank of England
  4. the Federal Reserve 

Answer: 2

 

UNIT 3: MONETARY POLICY

Q1. Which of the following is the function of monetary policy?

  1. regulate the exchange rate and keep it stable
  2. regulate the movement of credit to the corporate sector
  3. regulate the level of production and prices
  4. regulate the availability, cost and use of money and credit

Answer: 4

Q2. The main objective of monetary policy in India is _______:

  1. reduce food shortages to achieve stability
  2. economic growth with price stability
  3. overall monetary stability in the banking system
  4. reduction of poverty and unemployment

Answer: 2

Q3. The monetary transmission mechanism refers to

  1. how money gets circulated in different sectors of the economy post monetary policy
  2. the ratio of nominal interest and real interest rates consequent on a monetary policy
  3. the process or channels through which the evolution of monetary aggregates affects the level of product and prices
  4. none of the above  

Answer: 3

Q4. A contractionary monetary policy‐induced increase in interest rates

  1. increases the cost of capital and the real cost of borrowing for firms
  2. increases the cost of capital and the real cost of borrowing for firms and households
  3. decreases the cost of capital and the real cost of borrowing for firms
  4. has no interest rate effect on firms and households

Answer: 2

Q5. ---------------- is a money market instrument, which enables collateralised short term borrowing and lending through sale/purchase operations in debt instruments.

  1. OMO
  2. CRR
  3. SLR
  4. Repo

Answer: 1

 

CA Intermediate FMECO - SECTION B - MCQ for Chapter 4 -   

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