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AP Intermediate 2nd Year Introduction to Microeconomics — practice questions — page 2

Explore 47 free Introduction to Microeconomics questions in AP Intermediate 2nd Year Economics. Open each question or exercise to read its content, reference answers and available explanation.

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Introduction to Microeconomics questions and exercises with answers

Showing questions 31–47 of 47.

In which year did India get its central bank, the Reserve Bank of India?Read the answer and worked solution →Which function of money removes the need for a double coincidence of wants in trade?Read the answer and worked solution →The Cash Reserve Ratio is the percentage of a bank's deposits that it must hold asRead the answer and worked solution →The RBI is described as the 'lender of last resort' because itRead the answer and worked solution →Which of these is a function of the Reserve Bank of India?Read the answer and worked solution →Currency issued by the central bank, held by the public or by banks, is known asRead the answer and worked solution →A commercial bank's 'spread' is the difference between the interest itRead the answer and worked solution →Which requirement obliges a bank to hold reserves in liquid form in the short term?Read the answer and worked solution →When the RBI buys government bonds in the open market, the money supplyRead the answer and worked solution →The rate at which the RBI lends money through a repurchase agreement is theRead the answer and worked solution →Under a reverse repurchase agreement, the RBI is effectivelyRead the answer and worked solution →An increase in the bank rate affects the money supply by makingRead the answer and worked solution →Which of these is a quantitative tool of monetary control?Read the answer and worked solution →As interest rates rise, the quantity of money people wish to holdRead the answer and worked solution →A general rise in the price level means the purchasing power of money hasRead the answer and worked solution →Jan Dhan accounts and Aadhaar-enabled payment systems are steps towardsRead the answer and worked solution →With a CRR of 20 per cent and an initial deposit of Rs 100, how much can the bank lend in the first round?Read the answer and worked solution →

Worked practice questions

In which year did India get its central bank, the Reserve Bank of India?

  1. 1949
  2. 1921
  3. 1935
  4. 1947
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Correct answer: C. 1935

1. The central bank of a country is the institution that issues its currency and controls money supply. 2. India's central bank is the Reserve Bank of India. 3. It was established in **1935**, before independence. 4. 1949 is the year the RBI was nationalised, and 1947 is independence, so both are common traps here. _Source: syllabus Introductory Macroeconomics, Ch 3 "Money and Banking", section 3.2 DEMAND FOR MONEY AND SUPPLY OF MONEY_

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Which function of money removes the need for a double coincidence of wants in trade?

  1. Medium of exchange
  2. Store of value
  3. Unit of account
  4. Deferred payment
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Correct answer: A. Medium of exchange

1. Under barter, a trade needs both parties to want what the other has. 2. Money is accepted by everyone, so a seller takes money rather than goods. 3. That role is money acting as a **medium of exchange**. 4. Unit of account is about measuring value, and store of value is about carrying wealth forward, so neither solves the matching problem. _Source: syllabus Introductory Macroeconomics, Ch 3 "Money and Banking", section 3.1 FUNCTIONS OF MONEY_

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The Cash Reserve Ratio is the percentage of a bank's deposits that it must hold as

  1. foreign currency
  2. cash reserves
  3. loans to industry
  4. government bonds
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Correct answer: B. cash reserves

1. The RBI caps credit creation by fixing a minimum reserve. 2. CRR is the share of deposits a bank must keep as **cash reserves**. 3. With a CRR of 20 per cent, deposits of Rs 100 require Rs 20 held back, leaving Rs 80 to lend. 4. Holding government securities is the SLR requirement, which is a separate rule. _Source: syllabus Introductory Macroeconomics, Ch 3 "Money and Banking", section 3.3.2 Limits to Credit Creation and Money Multiplier_

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