Indian Economy MCQ

Question 1

1. Choose the incorrect statement

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.

Answer

A) Anything that would act as a medium of exchange is money ✓

Question 2

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

D) medium of exchange, unit of account, income distribution

Answer

C) medium of exchange, unit of account, store of value ✓

Question 3

3. Demand for money is

B) Direct demand

C) Real income demand

D) Inverse demand

Answer

A) Derived demand ✓

Question 4

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

Answer

D) interest rate, opportunity cost, demand for money ✓

Question 5

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

Answer

D) All the above ✓

Question 6

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

B) Fisher’s theory of money

C) Classical approach

D) Keynesian Approach

Answer

A) Cash balance approach ✓

Question 7

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

D) None of the above

Answer

C) money as a means of transactions and therefore, demand for money is only transaction demand for money. ✓

Question 8

8. Real money is

B) real national income .20

C) money demanded at given rate of interest

D) nominal GNP divided by price level

Answer

A) nominal money adjusted to the price level ✓

Sample Questions: Indian Economy