15 extra multiple-choice questions for Monetary Economics (12th Standard Economics, Samacheer Kalvi), beyond the ones printed in the textbook — each with the correct option highlighted and a clear, worked explanation. Free to read in English and Tamil.
Q1
Which economist defined money with the simple phrase, "Money is, what money does"?
- A. Crowther
- B. WalkerCorrect
- C. Irving Fisher
- D. J.M. Keynes
Explanation. Francis A. Walker defined money functionally by stating that money is defined by the performance of its duties, simply stating 'money is what money does'.
Q2
According to the historical evolution of trade, which ancient tribe first introduced the barter system around 6000 BC?
- A. Phoenicians
- B. Babylonians
- C. Mesopotamian tribesCorrect
- D. Romans
Explanation. The barter system was historically introduced by the Mesopotamian tribes, and later improved and adopted by the Phoenicians and Babylonians.
Q3
Under the metallic standard, what is the relationship between the face value and the intrinsic metal value of standard coins?
- A. Face value is less than intrinsic value
- B. Face value is equal to intrinsic valueCorrect
- C. Face value is greater than intrinsic value
- D. There is no relationship between the two values
Explanation. Standard coins under a metallic standard are full-bodied legal tender, meaning their face value is equal to their intrinsic metal value.
Q4
Which of the following is classified as a primary function of money?
- A. Standard of deferred payments
- B. Store of value
- C. Measure of valueCorrect
- D. Transfer of purchasing power
Explanation. Money has two primary functions: acting as a medium of exchange and serving as a common measure of value.
Q5
When money is used to transfer capital from less productive to more productive uses, which function is it performing?
- A. Primary function
- B. Secondary function
- C. Contingent functionCorrect
- D. Static function
Explanation. Increasing the productivity of capital by acting as its most liquid form is a contingent function of money.
Q6
In the estimation of money supply by the Reserve Bank of India, what constitutes M3?
- A. M1 + Savings deposits with post office savings banks
- B. M2 + Time deposits of all commercial and cooperative banksCorrect
- C. M1 + Time deposits of all commercial and cooperative banks
- D. M3 + Total deposits with post offices
Explanation. Broad money M3 is calculated by taking M2 and adding time deposits of all commercial and cooperative banks.
Q7
What does the Cash Reserve Ratio (CRR) refer to in the context of money supply determinants?
- A. The ratio of money held by the public in currency to bank deposits
- B. The fraction of deposits banks must keep with the RBICorrect
- C. The fraction of deposits banks must keep in the form of liquid assets
- D. The ratio of vault cash to deposits of commercial banks
Explanation. The Cash Reserve Ratio is the specific fraction of total bank deposits that commercial banks are legally mandated to maintain with the central bank.
Q8
The unique Indian Rupee symbol, selected by the Union Cabinet on July 15, 2010, is an amalgamation of which scripts?
- A. Devanagri 'Ra' and Roman 'R' without the stemCorrect
- B. Sanskrit 'Ra' and Greek 'R' with the stem
- C. Devanagri 'Ra' and Greek 'R' without the stem
- D. Sanskrit 'Ra' and Roman 'R' with the stem
Explanation. The Indian Rupee symbol designed by D. Udaya Kumar blends the Devanagri character 'Ra' and the Roman letter 'R' without its vertical stem.
Q9
Which of the following is Marshall's algebraic equation representing the Cambridge Cash Balances Approach?
- A. MV = PT
- B. M = KPYCorrect
- C. n = pk
- D. p = n / k
Explanation. Alfred Marshall formulated the cash balance equation as M = KPY, where M is money quantity, Y is real income, P is purchasing power, and K is the fraction held as cash.
Q10
In Keynes's cash balance equation n = pk, what does the variable 'k' represent?
- A. The total supply of money
- B. The general price level of consumer goods
- C. The total quantity of consumption units people keep in cashCorrect
- D. The cash reserve ratio of banks
Explanation. In Keynes's Cash Balance equation, 'k' is a real balance representing the quantity of consumption units that people choose to hold in cash form.
Q11
When the annual rate of inflation rises moderately into a single digit of 3% to 9%, it is classified as which type of inflation?
- A. Creeping inflation
- B. Running inflation
- C. Walking inflationCorrect
- D. Galloping inflation
Explanation. Walking or trolling inflation occurs when prices rise moderately, and the annual inflation rate is within a single-digit range of 3% to 9%.
Q12
Which type of inflation is caused by the hoarding of goods and black marketing, leading to a sudden fall in supply?
- A. Credit inflation
- B. Profit-induced inflation
- C. Scarcity-induced inflationCorrect
- D. Tax-induced inflation
Explanation. Scarcity-induced inflation occurs when goods become scarce due to a fall in production or deliberate hoarding and black marketing.
Q13
Who among the following benefits or gains during a period of high inflation?
- A. Creditors
- B. DebtorsCorrect
- C. Fixed-income groups
- D. Long-term bond investors
Explanation. Debtors gain during inflation because they repay their loans with money that has lower purchasing power than when they borrowed it.
Q14
Which of the following is a qualitative or selective method used by central banks to control credit?
- A. Bank Rate Policy
- B. Open Market Operations
- C. Variable Reserve Ratio
- D. Moral SuasionCorrect
Explanation. Moral suasion is a qualitative credit control method where the central bank advises and persuades commercial banks to cooperate with its policies.
Q15
In the study of trade cycles, what is the extreme lowest point of a depression phase called?
- A. Boom
- B. Recession
- C. TroughCorrect
- D. Recovery
Explanation. A trade cycle has four phases, and the deep, lowest point of the depression phase is specifically referred to as the trough.
Frequently asked questions
How many MCQs are there in Monetary Economics?
This chapter has 15 book-back multiple-choice questions, each with the correct answer and a step-by-step explanation.
Are these 12th Standard Economics MCQs free to practise online?
Yes. Every question, answer and explanation here is free, and you can also take them as a timed practice test.
Where can I find the Monetary Economics book-back answers?
The correct option for each question is highlighted on this page with a worked explanation, plus a quick answer-key summary at the top.
