Short Questions and Answer:
the India’s Central Bank.
Central Bank is the Reserve Bank of India.
Q.2. What is
the main function of money in an economic system?
main function of money is to facilitate the exchange of goods and services i.e.,
to lessen the time and effort required to carry on trade.
Q.3. How can
money be defined?
can be defined as anything that is generally acceptable as a means of exchange
and acts as a measure and as a store of value.
Q.4. What is the basic characteristic of money?
The basic characteristic of money is general acceptability.
Q.5. What is
legal tender money?
tender money is the money which every individual is bound to accept in exchange
of goods and services or in discharge of debts.
Q.6. What is
exchange of goods against goods without use of money is called barter exchange.
Q.7. What is
meant by High Powered Money?
liability of the monetary authority of the country, RBI, is called the monetary
base or high powered money. It is the money created or produced by RBI and
government of India.
Q.8. What is
is defined as ‘accepting for purpose of lending or investments of deposit of
money from the public repayable on demand or otherwise and withdrawal by
cheque, draft, and order or otherwise.’
types of banks exists in every country Central bank and commercial banks.
What are Commercial Banks?
commercial bank is a financial institution, which performs the functions of
accepting deposits from the general public and giving loans for investment,
with the aim of earning profit.
Q.10. RBI is
the central bank of India. What do you mean by a central bank?
central bank is the apex institution of monetary system of a country. It is
banker to the other banks and to the Government; it issues notes, controls
money supply and credit, and maintains monetary stability.
does central bank acts as banker to the Government?
Government keeps their balances in the current account with the central bank.
Similarly, central bank accepts receipts and makes payment on behalf of the Government.
the function of collection and publication of data.
Bank has also been entrusted with the tasks of collection and compilation of
statistical information, relating to banking and other financial sectors of
Q.13. What governs note issuing in India?
issuing is governed by the Minimum Reserve System. The entire
currency issued, has the backing of minimum gold reserve.
are primary deposits?
deposits are cash deposits with the commercial banks by the people.
is secondary deposits?
that arise on account of loans by the banks to the people are called secondary
is selective credit control?
It refers to the discriminatory policy of the central bank in favour of certain
sectors of the economy.
Q.17. What do you
mean by Cash Reserve Ratio (CRR)?
Every commercial bank, under law, has to deposit with Central bank a minimum
percentage of its demand and its deposits. This percentage is called as CRR. A
high CRR means more reserves and fewer loans.
By changing CRR, Central bank controls the
lending capacity and credit availability of banks. Recently, RBI has raised CRR
from 5.5% to 6% w.e.f. March 3, 2007 in order to control inflation.
In case of deflation, RBI decreases the CRR.
Q.18. What are
the difficulties associated with the barter system of exchange?
are the difficulties associated with the barter system:
Lack of double
coincidence of wants
Lack of common
measure of values
storage and transfer of wealth
the types of loans and advances made by banks.
types of loans and advances made by banks are:
are the functions of a Central Bank?
The functions of Central Bank are as follows:
Banker’s bank and
credit and money supply
foreign exchange Next