Prelims-QIP

(Quality Improvement Programme)

Prelims- QIP
(Quality Improvement Programme)
Economy
Economy

Presented by: G. Raja Kumar

Presented by: G. Raja Kumar

Characteristics of Money:
Q. Consider the following statements about Money:
1. Money reduces the cost of searching for double
coincidence of wants
2. Money is a highly liquid asset owing to its inherent
value
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Demand for Money
Q) Consider the following statements about the demand for
money in an economy?
1. The demand for money is directly proportional to the
level of interest rates in the economy
2. The demand for money is inversely proportional to the
price level in the economy.
3. The aggregate demand for money increases with
decreasing national income in the economy.
Select the correct answer using the code given below:
a) 1 and 2 only
b) 2 and 3 only
c) 2 only
d) 3 only
Q) Supply of money remaining the same when there is an
increase in demand for money, there will be (2013)
(a) a fall in the level of prices
(b) an increase in the rate of interest
(c) a decrease in the rate of interest.
(d) an increase in the level of income and employment
Liquidity Trap:
Q) Consider the following statements about “liquidity trap”?
1. It occurs when the central bank increases the interest rates
in the economy to control inflation
2. It results in effective monetary policy transmission in the
economy
3. It occurs when there is a shortage of money supply in the
economy
Select the correct answer using the code given below:
a) 1 only
b) 1 and 3 only
c) 3 only
d) 1, 2 and 3
 Money Supply

Money Multiplication process

Q) The money multiplier in an economy increases with which
one of the following? (2021) (2019)
(a) Increase in the Cash Reserve Ratio in the banks
(b) Increase in the Statutory Liquidity Ratio in the banks
(c) Increase in the banking habit of the people
(d) Increase in the population of the country
Q. Consider the following statements:
1. Decreasing Currency deposit ratio increases money supply
2. Increasing Reserve ratio will have high money multiplier
effect and increases money supply
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
➢ Reserve Money (M0) = Currency in circulation + Bankers’ deposits
with the RBI + Other deposits with the RBI
➢ M1 = Currency held with public + Demand deposits of banks (Current
and Saving deposit accounts)+ other deposits with the RBI.
➢ M2 = M1 + Savings deposits with post office savings banks.
➢ M3 = M1+ Net time deposits with the banking system.
➢ M4= M3+ Total deposits with the Post Office Savings Organization
(excluding National Savings Certificates).