Knock out the money myths

Exercise and reference answers

Questions

1. Question

   Three of these claims about money supply are false.

   Choices

   1. Item

      Raising the bank rate shrinks money supply

      Correct

      Yes

   2. Explanation

      syllabus is blunt: demand deposits are not legal tenders

      Item

      Demand deposits count as legal tender

   3. Explanation

      SLR is held in liquid form; the cash ratio is CRR

      Item

      SLR is the cash kept with the RBI

   4. Explanation

      Fiat money has no intrinsic value at all

      Item

      Fiat money is backed by gold coins

Instructions

Tap each claim you can prove false. The true one stays put.

Explanation