Free Understanding Money 03 Practice Test - 12th Grade - Commerce 

Question 1

Which of the following is a commonly accepted definition of money?

A.

Any good which is commonly used as a store of value

B.

Any good which is exchanged for gold at a fixed rate

C.

Any good which is acceptable to a bank

D.

Any good which is commonly accepted as a medium of exchange

SOLUTION

Solution : D

Any commodity that is accepted as a medium of exchange is money. 

Question 2

The primary function of money is:

A.

Transfer of value

B.

Measure of value

C.

Medium of exchange

D.

Both (b) and (c)

SOLUTION

Solution : D

Money must serve as a measure of value and a medium of exchange. 

Question 3

Full-bodied money is that money whose money value and commodity value are:

A.

equal in the market

B.

declared as equal by the government

C.

different in the market

D.

declared as equal by the RBI

SOLUTION

Solution : A

For full-bodied money, the money value and commodity value of the money are equal in the market. 

Question 4

The cheque performs functions that are different from that of money. State true or false.

A.

True

B.

False

SOLUTION

Solution : B

Functions of the cheque are the same as that of money.

Question 5

The Central Bank in India is called:

A.

Federal Reserve of India

B.

Indian Central Bank

C.

Bank of India

D.

Reserve Bank of India

SOLUTION

Solution : D

The Reserve Bank of India is India’s central bank.

Question 6

The total amount of currency notes and coins in circulation is called .

SOLUTION

Solution :

Monetary mass refers to the set of notes and coins in circulation.

Question 7

The process by which old and worn out notes are replaced by new ones in the economy is called 

SOLUTION

Solution :

Sanitation refers to the process by which old and worn out notes are replaced by new ones in the economy.

Question 8

For money to serve as money, it must be unlimited in supply. State true or false.

A.

True

B.

False

SOLUTION

Solution : B

Money must have limited quantities of supply in order to maintain its value.

Question 9

Paper money has intrinsic value. State true or false.

A.

True

B.

False

SOLUTION

Solution : B

Paper money has no intrinsic value- it is just paper! It has representative value instead!

Question 10

The value of a cow today is the same as its value one year from now. Which of the following functions does the cow serve?

A.

Medium of exchange

B.

Store of value

C.

Unit of account

D.

Standard of deferred payments

SOLUTION

Solution : B

As a store of value, the cow maintains its value over time.

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