Money and Banking Important Questions Class 12 Economics
Q: Define moral suasion
Ans. Moral suasion refers to persuasion as well as pressure exercised by the central bank on the commercial banks to be restricted and selective in lending during inflation and to be liberal in lending during deflation.
1 MARK Important Questions >>>>
1. What are demand deposits?
2. What are time deposits?
3. What is a Central Bank
4. Define Cash Reserve Ratio
5. Define Statutory Liquidity Ratio.
6. Define bank rate
7. What is commercial bank?
3 MARK Important Questions >>>>
Q8 Explain the currency authority function of Central Bank
9. Explain lender of the last resort function of the Central Bank
10. Explain the banker to the government function of the Central Bank.
Q11.Explain the meaning of Cash Reserve Ratio and Statutory Liquidity Ratio
Ans::: Cash Reserve Ratio The percentage of total deposits, which a commercial bank needs to keep as reserve with the Central Bank, this ratio is termed as Cash Reserve Ratio.
Statutory Liquidity Ratio Every commercial bank is required to maintain a fixed percentage of its assets in the form of cash or other liquid assets. This is termed as Statutory Liquidity Ratio.
12 State any three points of distinction between Central Bank and commercial banks.
Q13 What is bank rate policy? How does it work as a method of credit control?
Q14 State three methods of credit control used by the Central Bank
4 Marks Important Questions >>>>>
Explain the credit creation role of commercial banks with the help of a numerical.
Explain the lender of last resort function of the Central Bank.
Explain the banker’s bank function of Central Bank.
Q Explain any two methods of credit control used by Central Bank
Ans:: (i) Margin requirement
(ii) Open market operations
Q Explain the components of Legal Reserve Ratio
Ans: (i) Cash Reserve Ratio The percentage of total deposits, which a commercial bank needs to keep as reserve with the Central Bank, this ratio is termed as Cash Reserve Ratio.
(ii) Statutory Liquidity Ratio Every commercial bank is required to maintain a fixed percentage of its assets in the form of cash or other liquid assets. This is termed as Statutory Liquidity Ratio.
Q Central Bank Vs Commercial Bank
| Central Bank | Commercial Banks |
| (i) Central bank functions as the apex bank of the country. (ii) The central bank designs and controls all instruments of monetary policy of the country. (iii) Central bank is the sole authority of note-1ssumg. (iv) Central bank does not deal directly with the general public. It does not accept deposits or advance loans. | (i) Commercial banks function according to the rules and regulations stipulated by the central bank. (ii) Commercial banks only execute the monetary policy as directed by the central bank. (iii) Commercial banks contribute to the flow of money only by way of credit creation. iv) Commercial banks deal directly with the general public by accepting deposits and advancing loans. |
10 Most Important Questions Class 12 asked repeatedly (PYQ) in CBSE Board Exams
1. Explain ‘government’s bank’ function of central bank. Or
Explain ‘banker to the government’ function of the central bank.
2. Explain the ‘bank of issue’ function of central bank.
Q3 Currency is issued by the central bank, yet we say that commercial banks create money. Explain. How is this money creation by commercial banks likely to affect the national income?Explain.
4 Government of India has recently launched ‘Jan-Dhan Yojana’ aimed at every household in the country to have at least one bank account. Explain how deposits made under the plan are going to affect national income of the country.
Q5 Explain the “bankers’bank” function of the central bank.
Q6 Explain how open market operations are helpful in controlling credit creation.
Q7 Explain how ‘bank rate’ is helpful in controlling credit creation
Q8 Explain the role of cash reserve ratio in controlling credit creation.
Q9 Explain how ‘repo rate’ can be helpful in controlling credit creation.
Q10 State the meaning and components of money supply.
Q11 Explain money creation function of commercial banks.