# Free The Banking System 02 Practice Test - 12th Grade - Commerce

Commercial banks accept deposits from the public in the form of:

A.

Chequeable deposits

B.

Non-chequeable deposits

C.

Both (a) and (b)

D.

Gold deposits

#### SOLUTION

Solution : C

Banks accept deposits as chequeable deposits and non-chequeable deposits.

Maximum credit that the commercial banks can legally create depends on their:

A.

Gold reserves

B.

Cash reserves with the RBI

C.

Statutory liquidity ratio

D.

Term deposits

#### SOLUTION

Solution : B

Cash reserves with the RBI determine the amount of credit banks can create.

Central bank is an apex bank of the country that:

A.

Controls the entire banking system of the country

B.

Issues currency

C.

Acts as a banker to the government

D.

All of these

#### SOLUTION

Solution : D

The central bank performs all of these functions.

Maximum credit that the commercial banks can legally create is indicated by:

A.

1SLR

B.

1CRR×1Cash Reserves with the RBI

C.

1CRR×Total deposits

D.

1CRR×Cash reserves with the RBI

#### SOLUTION

Solution : C

1CRR×Total deposits is the total amount of credit banks can create.

How many major motives exist to hold money with oneself?

A.

1

B.

2

C.

3

D.

4

#### SOLUTION

Solution : C

There are 3 major motives to hold money.

When interest rates are high, speculative demand for money is ________.

A.

High

B.

Low

C.

Independent of interest rates

D.

Invariable

#### SOLUTION

Solution : B

Speculative demand for money is low when interest rates are high as people convert their money to bonds and stocks.

If the availability of credit is low, the precautionary demand for money will be:

A.

Low

B.

High

C.

Independent of credit

D.

Cannot be determined

#### SOLUTION

Solution : B

If credit is highly unavailable, people will hold more money as precaution.

Deposits in the banks are:

A.

Assets of the bank

B.

Liabilities of the bank

C.

Liabilities of the depositors

D.

None of the above

#### SOLUTION

Solution : B

Deposits are part of the liabilities of the bank.

The goal of a public sector bank is:

A.

Profit

B.

Welfare

C.

Financial inclusion

D.

All of the above

#### SOLUTION

Solution : D

A public sector bank has all three goals.

Which of the following is the most liquid measure of money supply?

A.

M1

B.

M2

C.

M3

D.

M4

#### SOLUTION

Solution : A

M1 is most liquid.