Assertion Reason: Money and Banking

1.Assertion (A): The modern currency is used as a medium of exchange; however, it does not have a use of its own. Reason (R) : Modern currency is easy to carry. Alternatives: :

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is B)

2.Assertion (A): The currency notes do not carry as much value in them as is denominated, still have general acceptance. Reason (R): Currency notes are backed by a legal promise from the central bank and central government of the country. Alternatives:

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B)Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is A)

3.Assertion (A): The monetary policy is a policy formulated by the central bank. Reason (R): The policy involves measures taken to regulate the supply of money, availability, and cost of credit in the economy. Alternatives:

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is A)

4.Assertion (A): Commercial banks contribute to quantum of money supply in the economy through credit creation. Reason(R): As they do have note-issuing authority. Alternatives:

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is C)

5.Assertion (A): Repo rate is fixed by the Reserve bank of India , while Reverse repo rate is fixed by the commercial bank themselves. Reason (R): Both repo rate and reverse repo rate is fixed by the Reserve bank of India ,as it is an apex bank. Alternatives:

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is D)

6.Assertion (A) : Banks charge a higher interest rate on loans than what they offer on deposits. Reason (R) : The difference between what is charged from borrowers and what is paid to depositors is their main source of income. Alternatives:

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is A)

7.Assertion (A) : Money Multiplier refers to the process of creation of credit by the commercial Bank. Reason (R): Money creation by commercial bank raises the National Income. Alternatives:

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is B)

8.Assertion(A): Cheques are fiduciary money. Reason(R): It is issued by the government. alternatives

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is C)

9.Assertion (A) – Central bank as a banker to the government, works as a custodian of cash reserves. Reason (R)- The central bank acts as a clearing house for transfer and settlement of mutual claims of commercial banks. Alternatives

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is B)

10.Assertion (A): Currency held by the public is a monetary liability of the central bank. Reason (R): Central bank controls credit, whereas commercial banks create credit with the currency held by the public. Alternatives:

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is B)

11.Assertion (A): Central bank as a banker to the government, keeps record of all kinds of financial transaction Reason (R): Government borrows internally from banks and the general public. Alternatives.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is B)

12.Assertion (A): Size of multiplier is given by the inverse of LRR.  Reason(R): There is direct relationship between LRR and value of money multiplier . Alternatives:

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is C)

13. ssertion(A ): The central bank issues currency on the basis of CRR. Reason (R ): The CRR impacts credit creation capacity of the commercial bank. Alternatives:

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is D)

14.Assertion (A): Money Supply is a flow concept. Reason (R): Money Supply is measured at a particular point of time. Alternatives:

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is D)
Money supply is a stock concept.

15.Assertion (A):  Central Bank is the Lender of last Resort‘. Reason (R):  It is ready to lend to banks, when bank faced severe crises. If central bank refuses, there is no option for the banks but to shut down. Alternatives

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is A)

16.Assertion (A): Increase of Reverse Repo Rate will help to increase credit capacity of the commercial banks. Reason (R): Reverse repo rate is an effective instrument of monetary policy of the RBI: Alternative:

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is D)

17.Assertion (A) : In order to maintain the faith of depositors in banking system, it is sufficient for the commercial banks to keep only a small part of deposits as Cash Reserves. Reason (R) : A change in Reserve requirement affects the power of commercial bank to create the credit. Alternatives:

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is B)

18.Assertion (A): Central bank uses many tools such as Bank rate, repo rate, reverse repo rate etc. to control money supply in the economy. Reason (R): Central bank is the apex Bank of India. Alternatives:

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is B)

19.Assertion (A): To reduce the volume of credit, bank rate should be reduced. Reason (R):  A rise in bank rate implies that the cost of money would go up.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is D)

20.Assertion (A): Credit money are those whose face value is more than commodity value. Reason (R): Credit money does not have direct use.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but reason (R) is false.
D) Assertion (A) is false but reason (R) is true.

... Answer is B)