R4RIN – MCQs, Mock Tests | Economics Economics Money Banking and International Trade

Which one of the following approaches to the definition of money gives the widest possible view of money?

1. Central bank approach
2. Conventional approach
3. Chicago approach
4. Gurley Shaw approach

✅ Correct Answer: 1

The best example of representative full-bodied money is found in the gold certificates which circulated in the U.S.A. before being withdrawn from circulation in:

1. 1925
2. 1927
3. 1929
4. 1933

✅ Correct Answer: 4

Money has been defined as that by delivery of which debt contracts and price contracts are discharged and in the the shape of which general purchasing power is held . Whole definition is this?

1. G. Crowther
2. D.H.Robertson
3. J.M.Keynes
4. George N.Halm

✅ Correct Answer: 4

Fiat money refers to:

1. Credit money
2. Legal money
3. Full bodied money
4. International money

✅ Correct Answer: 2

Which one of the following is an example of quasi-money or near-money?

1. Bills of exchange
2. Cheque
3. Bank notes
4. Coins

✅ Correct Answer: 1

When the commodity value of money and its value as money are equal it is called:

1. Token money
2. Full-bodied money
3. Quasi-money
4. Fiat money

✅ Correct Answer: 2

The limited legal-tender money stands for the component of money which:

1. Is issued in a limited amount
2. Is legal tender for payment upto a certain maximum amount
3. Is legal tender in specified areas
4. Is to be used in specific transactions

✅ Correct Answer: 2

As compared to the classical theory which function of money was stressed more in the Keynesian theory?

1. Unit of account
2. Medium of exchange
3. Standard of deferred payments
4. Store of value

✅ Correct Answer: 4

Bad money drives good money out of circulation. With whole name is this law associated?

1. J.M.Keynes
2. Thomas Gresham
3. L.E.Mises
4. R.G.Hawtrey

✅ Correct Answer: 2

Identify the country which was the first to adopt the gold standard:

1. UK
2. France
3. Germany
4. USA

✅ Correct Answer: 1

During which decade of the nineteenth century did most European countries adopt the gold standard?

1. Sixties
2. Seventies
3. Eighties
4. Nineties

✅ Correct Answer: 3

When did the UK finally abandon the gold standard?

1. 1925
2. 1929
3. 1931
4. 1936

✅ Correct Answer: 3

Who is generally regarded as the founder of the Modern Quantity Theory of Money?

1. J.M.Keynes
2. Milton Friedman
3. M.L.Bursten
4. Don Patinkin

✅ Correct Answer: 2

The Quantity Theory of Money establishes the relationship between quantity of money in an economy and the level of:

1. Employment
2. National income
3. Prices
4. Savings

✅ Correct Answer: 3

Identify Pigou s cash balances equation:

1. M = Ky + K A
2. M = KPO
3. M = KR/P
4. M = PKT

✅ Correct Answer: 3

In the Fisher s equation of exchange MV = PT what does T denote?

1. Period of time
2. Volume of trade
3. Total money wealth
4. Trend value of general price level

✅ Correct Answer: 2

Cost-push inflation is caused by:

1. Increase in the quantity of money
2. In-crease in investment
3. Creation of credit money
4. Increase in the prices of inputs

✅ Correct Answer: 4

Who introduced the concept of the real balance effect?

1. A.C.Pigou
2. Alfred Marshall
3. J.M.Keynes
4. Milton Friedman

✅ Correct Answer: 1

Which of the following according to Milton Friedman is not a key determinant of the demand for money?

1. Aggregate wealth
2. Precautionary motive
3. Relative rates of return obtainable on different forms of assets
4. Physical non-human capital goods and human capital or wealth

✅ Correct Answer: 2

The cash transactions approach to the quantity theory of money is usually associated with the name of:

1. Alfred Marshall
2. Irving Fisher
3. J.M.Keynes
4. D.H.Robertson

✅ Correct Answer: 2

The relationship between the market rate of interest and the market price of a bond is:

1. Inverse
2. Direct
3. Positive and proportionate
4. Uncertain

✅ Correct Answer: 1

The degree of elasticity in respect of speculative demand for money under the liquidity trap conditions is:

1. Zero
2. One
3. Greater than one
4. Infinite

✅ Correct Answer: 4

A retail price index is a good measure of changes in:

1. Consumers cost of living
2. General purchasing power of money
3. Average standard of living
4. Patterns of consumer expenditure

✅ Correct Answer: 1

Which of the following is not an instrument of monetary policy?

1. Taxation
2. Bank rate
3. Open-market operations
4. Credit rationing

✅ Correct Answer: 1

At a very low rate of interest the interest-elasticity of the speculative demand for money becomes:

1. Low
2. High
3. Very high
4. Infinite

✅ Correct Answer: 4

In which capacity does a person stand to gain from deflation?

1. As a pensioner
2. As a debtor
3. As an entrepreneur
4. As an equity-holder

✅ Correct Answer: 1

The liquidity trap condition occurs at a:

1. Low rate of interest
2. Very low rate of interest
3. High rate of interest
4. Very high rate of interest

✅ Correct Answer: 4

In which capacity does a person stand to gain from deflation?

1. As a pensioner
2. As a debtor
3. As an entrepreneur
4. As an equity-holder

✅ Correct Answer: 1

According to the classical approach the demand for money primarily depends upon:

1. Rate of interest
2. Economic transactions
3. Speculative activity
4. Precautionary motive

✅ Correct Answer: 2

Which of the following measures is helpful in controlling inflation?

1. Raising the bank rate
2. Price control and rationing of essential goods
3. Reduction of government expenditure
4. All of the above

✅ Correct Answer: 4

Stagflation refers to a situation which is characterised by:

1. Deflation and rising unemployment
2. Inflation and deflation
3. Sustained price-rise and rising unemployment
4. Stagnant employment and deflation

✅ Correct Answer: 3

During the period of hyper-inflation there takes place astronomical rise in prices and as a result money becomes almost worthless. Such a situation was witnessed in Germany in 1923 and in China in:

1. 1947
2. 1949
3. 1951
4. 1953

✅ Correct Answer: 2

The first explanation of stagflation was offered originally in 1931 by:

1. Friedrich A.von Hayek
2. J-M. Keynes
3. Bent Hansen
4. Milton Friedman

✅ Correct Answer: 1

The reduction or elimination of inflation is known as:

1. Disinflation
2. Deflation
3. Creeping inflation
4. Stagflation

✅ Correct Answer: 1

Which of the following is not a function of a commercial bank?

1. Accepting public deposits
2. Granting loans and advances
3. Undertaking agency functions
4. Banker to the Government

✅ Correct Answer: 4

Which of the following is not a liability of commercial banks?

1. Demand deposits
2. Time deposits
3. Advances from the central bank
4. Security holdings

✅ Correct Answer: 4

Which is not a function of the central bank of a country?

1. Lender of the last resort
2. Controller of credit
3. Custodian of nation s foreign exchange reserves
4. Supervisor of nation s fiscal policy

✅ Correct Answer: 4

Under the unit banking system each individual bank is a separate entity having its own independent management and board of directors. Which country is generally regarded as the home of the unit banking system?

1. USA
2. Germany
3. France
4. Japan

✅ Correct Answer: 1

The branch banking system is currently in vogue in most countries of the world. Identify the country where it first developed:

1. South Africa
2. UK
3. Canada
4. Australia

✅ Correct Answer: 2

The china banking system a variant of the group banking system developed around the mid-nineteenth century and reaching the apex of popularity in the present century. In which country did it develop?

1. USA
2. UK
3. Germany
4. Italy

✅ Correct Answer: 1

In which country was the instrument of minimum legal cash reserves ratio for banks first introduced?

1. USA
2. UK
3. Germany
4. Japan

✅ Correct Answer: 1

Which of the following is not a part of the un-organised Indian money market?

1. Indigenous bankers
2. Co-operative credit societies
3. Chit funds
4. Money lenders

✅ Correct Answer: 2

Which one of the following will reduce the capacity of commercial banks to lend?

1. Sales of securities in the open market by the central bank
2. Reduction in the discount rate
3. Reduction of the required cash reserves ratio
4. Purchase of securities by the Central bank in the open market

✅ Correct Answer: 1

If there is a significant decrease in the demand for loans banks will be forced to:

1. Sell securities to the public
2. Adjust their protfolios
3. Resort to creating credit
4. Increase liquidity

✅ Correct Answer: 2

Open market operations refer to the buying and selling of:

1. Commercial bills
2. Foreign exchange
3. Gold
4. Government securities

✅ Correct Answer: 4

Bank rate refer to the interest rate at which:

1. Commercial banks receive deposits from the public
2. Central bank gives loans to commercial banks
3. Government loans are floated
4. Commercial banks grant loans to their customers

✅ Correct Answer: 2

The immediate effect of credit-creation by banks is:

1. Rise in prices
2. Increase in money supply
3. Increase in real national income
4. Reduction of poverty

✅ Correct Answer: 2

Selective credit control devices are used by the central bank of a country to:

1. Regulate the volume of aggregate bank credit in the economy
2. Regulate credit-creation on the part of some selected banks
3. Control the flow of aggregate bank credit to different productive activities in the economy
4. Selectively allocate credit among banks

✅ Correct Answer: 3

In a bimetallic standard:

1. Two metals (usually gold and silver) are simultaneously monetized and their monetary values are fixed as legal tender
2. Both gold and silver coins circulate as unlimited legal tender
3. Coinage as well as exports and imports of both the metals are free
4. All of the above

✅ Correct Answer: 4

One of the following is an instrument of qualitative credit control. Identify it:

1. Credit rationing
2. Bank rate
3. Open-market operations
4. Minimum statutory cash reserves ratio

✅ Correct Answer: 1

Arrange the following assets of a bank in the ascending order of income (i.e. in the descending order of liquidity): I-Bills II-Loans III-In-vestments in Government and other approved securities

1. I II III
2. I III II
3. II I III
4. III II I

✅ Correct Answer: 2

Which of the following is an instrument of quantitative credit control?

1. Credit rationing
2. Prescribing margin requirements
3. Variable reserve ratio
4. Consumer credit regulation

✅ Correct Answer: 3

Which of the following is not an item on the assets side of the balance sheet of a commercial bank?

1. Investments
2. Money at call and short notice
3. Reserves
4. Advances

✅ Correct Answer: 3

Commercial banks have always to face a conflict between:

1. Sharcholders and depositors
2. Central bank and themselves
3. Liquidity and profitability
4. Demand deposits and time deposits

✅ Correct Answer: 3

The main function of legal cash reserve requirements is to:

1. Ensure safely of deposits
2. Influence the demand deposit-creating power of commercial banks
3. Regulate the inter-sect oral flow of money supply
4. Keep a portion of deposits liquid

✅ Correct Answer: 2

Since when has the Reserve Bank of India been successfully operating the instrument of selective credit control in this country?

1. 1939
2. 1951
3. 1956
4. 1961

✅ Correct Answer: 3

Identify the country which first employed credit rationing as an instrument of credit control:

1. Germany
2. UK
3. USA
4. France

✅ Correct Answer: 4

The terms of trade refer to:

1. Comparative advantage of one country over another in the production of a particular commodity
2. Bilateral trade agreements
3. Rates of exchange between two currencies
4. Ratio of the index of export prices to the index of import prices.

✅ Correct Answer: 4

By which year had the gold standard virtually disappeared from the world as an international monetary system?

1. 1933
2. 1936
3. 1939
4. 1945

✅ Correct Answer: 2

The market for very short term loans is known as:

1. Capital market
2. Money market
3. Stock market
4. Discount market

✅ Correct Answer: 2

If the increase in exports exceeds the increase in imports and other things remain the same then the level of income will:

1. Rise
2. Remain the same
3. Fall
4. Move in an uncertain manner

✅ Correct Answer: 1

Which of the following was not favoured by the mercantilists?

1. Accomulation of gold by the country
2. Free trade
3. Export promotion
4. Import restriction

✅ Correct Answer: 2

Of the following concepts of term of trade which one was introduced by F.W. Taussig?

1. Income terms of trade
2. Commodity terms of trade
3. Real cost terms of trade
4. Double fact oral terms of trade

✅ Correct Answer: 2

Dynamic factors in the realm of international trade theory relate to changes in:

1. Income
2. Factor endowments
3. Technical knowledge and methods of production
4. All of the above

✅ Correct Answer: 4

The devaluation of currency by a country is designed to lead to:

1. Expansion of the export trade
2. Contraction of import trade
3. Promotion of import substitution
4. All of these

✅ Correct Answer: 4

What would be the impact on the country s balance of payments position when in the context of inflationary pressures recourse is taken to expenditure reducing policies?

1. Highly unfavourable
2. Unfavourable
3. Favourable
4. Neutral

✅ Correct Answer: 3

Which of the following items in the balance of payments is invisible?

1. Government expenditure abroad
2. Foreign investment
3. Foreign travel
4. Goods exported

✅ Correct Answer: 3

If the elasticity of foreign demand for the country s exports is unity the supply curve of foreign exchange will be:

1. Backward bending
2. Vertical
3. Positively sloping from left to rigt
4. Horizontal

✅ Correct Answer: 2

A deficit disequilibrium in the balance of payments can be corrected through:

1. Devaluation
2. Monetary squeeze
3. Exchange controls and import quotas
4. All of the above

✅ Correct Answer: 4

The spot and forward markets in foreign exchange are linked to each other through:

1. Interest arbitrage
2. Hedging
3. Speculation
4. All of the above

✅ Correct Answer: 4

What does the modern theory of international trade predict regarding difference in factor prices between nations on account of trade? The difference:

1. Increases
2. Diminishes
3. Remains the same
4. Either diminishes or increases

✅ Correct Answer: 2

The multiple exchange rates were first employed by:

1. Brazil
2. Ecuador
3. Germany
4. Peru

✅ Correct Answer: 3

Which of the following statements is not correct?

1. Devaluation can have only temporary effects and it may provoke other countries to retaliate
2. Many countries of Europe resorted to exchange clearing agreements during the 1930s
3. The balance of payments of a country is a balance sheet showing the country s foreign assets and liabilities at any given period of time
4. The concept of single factoral terms of trade was developed by Jacob Viner.

✅ Correct Answer: 1

Under the flexible exchange rate system the exchange rate is determined by:

1. The central bank of the country
2. The forces of demand and supply in the foreign exchange market
3. The price of gold
4. The purchasing power of currencies

✅ Correct Answer: 2

The elasticity of demand for foreign exchange for financing capital outflow is:

1. Zero
2. Greater than zero
3. One
4. Less than infinity

✅ Correct Answer: 1

The foreign exchange market performs the function of:

1. Transfer of purchasing power
2. Provisions of credit for financing foreign trade
3. Furnishing facilities for hedging foreign exchange risks
4. All of the above

✅ Correct Answer: 4

According to the Heckscher-Ohlin theory of international trade the most important cause of differences in relative commodity pries and trade between nations is the differences in:

1. Consumer tastes and preferences
2. Factor endowments
3. Knowledge and technology
4. Demand conditions

✅ Correct Answer: 2

On which of the following is the law of comparative costs based?

1. Labour theory of value
2. Opportunity cost theory
3. Law of diminishing returns
4. Both (a) and (b)

✅ Correct Answer: 1

Which among the following is not an assumption of the classical - territory of comparative cost advantage?

1. Labour is the only factor of production
2. Production takes place under diminishing returns
3. There are no tariffs
4. Prices are determined by their real labour costs of production

✅ Correct Answer: 2

Developing countries usually complain of:

1. Detoriation in their terms of trade
2. Serious hurdles in the way of export promotion
3. Uncertainty and inadequacy of reign aid
4. All of the above

✅ Correct Answer: 4

Adam Smith s views on world trade can be best understood if one considers them as a reaction to:

1. The mercantilist approach to trade
2. Ricardo s views on trade
3. The labour theory of value
4. None of the above

✅ Correct Answer: 2

What proportion of international trade is based on absolute differences in costs of production? .

1. All
2. Substantial
3. Very little
4. Nil

✅ Correct Answer: 2