The RBI Headquarters is located at
- A. Delhi
- B. Chennai
- C. MumbaiCorrect
- D. Bengaluru
Explanation. The Reserve Bank of India was established in 1935 and its headquarters was permanently moved from Calcutta to Mumbai in 1937.
12th Standard Economics — Monetary Economics: Book Back MCQs with Answers & Explanations
Every Book Back multiple-choice question from Monetary Economics (12th Standard Economics, Samacheer Kalvi) — each with the correct option highlighted and a clear, worked explanation. Free to read in English and Tamil.
Answer key at a glance
Money is
- A. acceptable only when it has intrinsic value
- B. constant in purchasing power
- C. the most liquid of all assetsCorrect
- D. needed for allocation of resources
Explanation. Money is considered the most liquid of all assets because it can be universally and instantly exchanged for any other good or service.
Paper currency system is managed by the
- A. Central Monetary authorityCorrect
- B. State Government
- C. Central Government
- D. Banks
Explanation. The paper currency standard, which uses inconvertible notes as legal tender, is managed and regulated by a country's central monetary authority to ensure price stability.
The basic distinction between M1 and M2 is with regard to
- A. post office total deposits
- B. saving deposits with post office savings bankCorrect
- C. Terms deposits of banks
- D. currency
Explanation. In India, M1 consists of currency and demand deposits, while M2 includes M1 along with savings deposits held with post office savings banks.
Irving Fisher's Quantity Theory of Money was popularized in
- A. 1908
- B. 1910
- C. 1911Correct
- D. 1914
Explanation. American economist Irving Fisher popularized the Cash Transaction version of the Quantity Theory of Money in his 1911 publication titled The Purchasing Power of Money.
MV stands for
- A. demand for money
- B. supply of legal tender moneyCorrect
- C. supply of bank money
- D. total supply of money
Explanation. In Irving Fisher's equation of exchange, MV represents the supply of legal tender currency notes and coins multiplied by its velocity of circulation.
Inflation means
- A. Prices are risingCorrect
- B. Prices are falling
- C. Value of money is increasing
- D. Prices are remaining the same
Explanation. Inflation is defined as a consistent, appreciable, and sustained increase in the general price level of goods and services over time.
__________ inflation results in a serious depreciation of the value of money.
- A. Creeping
- B. Walking
- C. Running
- D. HyperCorrect
Explanation. Hyperinflation, characterized by unmanageably high and rapid price increases, causes the purchasing power and value of a currency to depreciate severely.
__________ inflation occurs when general prices of commodities increases due to increase in production costs such as wages and raw materials.
- A. Cost-pushCorrect
- B. Demand-pull
- C. Running
- D. Galloping
Explanation. Cost-push inflation occurs when the general price level rises because of escalating production expenses, including raw materials and wage increases.
During inflation, who are the gainers?
- A. DebtorsCorrect
- B. Creditors
- C. Wage and salary earners
- D. Government
Explanation. Debtors benefit during inflation because they repay their loans in money that has lower purchasing power than the money they originally borrowed.
____________ is a decrease in the rate of inflation.
- A. DisinflationCorrect
- B. Deflation
- C. Stagflation
- D. Depression
Explanation. Disinflation refers to the process of slowing down the rate of inflation without causing unemployment or reducing real output in the economy.
Stagflation combines the rate of inflation with
- A. StagnationCorrect
- B. Employment
- C. Output
- D. Price
Explanation. Stagflation is an adverse economic situation that concurrently combines stagnant economic growth and high unemployment with high inflation.
The study of alternating fluctuations in business activity is referred to in Economics as
- A. Boom
- B. Recession
- C. Recovery
- D. Trade cycleCorrect
Explanation. The periodic ups and downs in aggregate economic activity, including fluctuations in output, employment, and income, are studied as trade cycles.
During depression the level of economic activity becomes extremely
- A. High
- B. Bad
- C. LowCorrect
- D. Good
Explanation. Depression represents the most severe phase of a trade cycle, characterized by an extremely low level of economic activity, high unemployment, and business closures.
"Money can be anything that is generally acceptable as a means of exchange and at the same time acts as a measure and a store of value." This definition was given by
- A. CrowtherCorrect
- B. A. C. Pigou
- C. F. A. Walker
- D. Francis Bacon
Explanation. Geoffrey Crowther defined money as anything that is generally acceptable as a medium of exchange, while simultaneously serving as a measure and store of value.
Debit card is an example of
- A. currency
- B. paper currency
- C. plastic moneyCorrect
- D. money
Explanation. A debit card is an example of plastic money, which serves as a modern alternative to cash or standard currency to facilitate electronic transactions.
Fisher's Quantity Theory of money is based on the essential function of money as
- A. measure of value
- B. store of value
- C. medium of exchangeCorrect
- D. standard of deferred payment
Explanation. Fisher's Quantity Theory of money assumes money serves primarily as a medium of exchange to facilitate transactions in an economy.
V in MV = PT equation stands for
- A. Volume of trade
- B. Velocity of circulation of moneyCorrect
- C. Volume of transaction
- D. Volume of bank and credit money
Explanation. In Irving Fisher's equation of exchange MV = PT, V represents the velocity of circulation of money.
When prices rise slowly, we call it
- A. galloping inflation
- B. mild inflationCorrect
- C. hyper inflation
- D. deflation
Explanation. When the general price level rises slowly and moderately, it is termed creeping or mild inflation, which is not dangerous to the economy.
___________ inflation is in no way dangerous to the economy.
- A. walking
- B. running
- C. creepingCorrect
- D. galloping
Explanation. Creeping inflation is very mild and slow-moving, making it safe and in no way dangerous for an economy.
More for this chapter
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About these Monetary Economics questions
These are the Book Back multiple-choice questions for Monetary Economics from the Tamil Nadu State Board (Samacheer Kalvi) 12th Standard Economics syllabus. Each question shows the correct option and an original, step-by-step explanation so you understand the method, not just the answer. Use the answer key above to jump to any question, then take the practice test to check yourself under exam-like conditions.
Frequently asked questions
How many MCQs are there in Monetary Economics?
This chapter has 20 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.
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1 Introduction to Macro Economics
2 National Income
3 Theories of Employment and Income
4 Consumption and Investment Functions
6 Banking
7 International Economics
8 International Economic Organisations
9 Fiscal Economics
10 Environmental Economics
11 Economics of Development and Planning
12 Introduction to Statistical Methods and Econometrics