CA Foundation Paper 4

Indian Economy MCQ

Chapter 8 • 44 Questions from ICAI Study Material

Questions

44

Est. Time

33 min

Exam Weight

8-10%

Source

ICAI Book

Sample Questions: Indian Economy

Preview 8 of 44 MCQs from Chapter 8

1. Choose the incorrect statement

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

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

A) medium of exchange, price control, store of value
B) unit of account, store of value , provide yields
C) medium of exchange, unit of account, store of value ✓
D) medium of exchange, unit of account, income distribution

3. Demand for money is

A) Derived demand ✓
B) Direct demand
C) Real income demand
D) Inverse demand

4. Higher the ______________, higher would be ________________of holding cash and lower will be the ______________________

A) demand for money, opportunity cost, interest rate
B) price level , opportunity cost, interest rate
C) real income , opportunity cost, demand for money
D) interest rate, opportunity cost, demand for money ✓

5. The quantity theory of money holds that

A) changes in the general level of commodity prices are caused by changes in the quantity of money
B) there is strong relationship between money and price level and the quantity of money is the main determinant of the price
C) changes in the value of money or purchasing power of money are determined first and foremost by changes in the quantity of money in circulation
D) All the above ✓

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

A) Cash balance approach ✓
B) Fisher’s theory of money
C) Classical approach
D) Keynesian Approach

7. Fisher’s approach and the Cambridge approach to demand for money consider

A) money’s role in acting as a store of value and therefore, demand for money is for storing value temporarily.
B) money as a means of exchange and therefore demand for money is termed as for liquidity preference
C) money as a means of transactions and therefore, demand for money is only transaction demand for money. ✓
D) None of the above

8. Real money is

A) nominal money adjusted to the price level ✓
B) real national income .20
C) money demanded at given rate of interest
D) nominal GNP divided by price level