Practice Test

Q1) Which one of the following options describe 'Collateral'? Show Answer

Q2) Which one of the following is not a limitation of the barter system ? Show Answer

Q3) Which one of the following was not a traditional form of money? Show Answer

Q4) Who issues currency notes in India? Show Answer

Q5) A cheque like currency notes act as- Show Answer

Q6) A deposit with a bank that can be withdrawn whenever the depositor likes to do so, is termed as- Show Answer

Q7) Which of the following does not constitute a part of informal credit in India? Show Answer

Q8) The functioning of the formal source of credit are supervised by- Show Answer

Q9) Banks do not give loans to- Show Answer

Q10) The number of members in a typical SHG varies between- Show Answer

Q11) Arrange the following in the correct sequence:
(i) Online payment, Debit card, Credit cards
(ii)Precious metal coins (gold, silver, copper)
(iii) Grain and Cattle
(iv) Modern Currency-Paper notes and coins Show Answer

Q12) Analyze the information given below, considering one of the following correct options:
Rita has taken loan of rs.7 lakhs from the bank to purchase a car. The annual interest rate on the loan is 14.5 per cent and the loan is to be repaid in 3 years in monthly installments. The bank retained the papers of the new car as collateral, which will be returned to Rita only when she repays the entire loan with interest. Show Answer

Q13) Analyze the information given below, considering one of the following correct option:
Mohan is an agricultural labourer. There are several months in a year when he has no work and needs credit to meet his daily expenses. He depends upon his employer, the landowner for credit who charges an interest rate of 5 per cent per month. Mohan repays the money by working physically for the landowner on his farmland.
Over the years his debt will- Show Answer

Q14) Analyze the information given below, considering one of the following correct options:
Mahesh is a small farmer. He has taken a loan of Rs.2 lakhs from the money lender to meet the expenses of cultivation. The annual interest rate on the loan is very high, so he is unable to repay the loan and he is caught in a debt. He has to sell a part of the land to pay off the debt. Show Answer

Q15) Analyze the information given below, considering one of the following correct options:
Ramu is a shoe manufacturer and he wants to directly exchange shoes for rice without the use of money. Now he will have to look for a rice growing farmer who not only wants to sell rice but also wants to buy the shoes in exchange. Show Answer

Q16) Analyze the information given below, considering one of the following correct options:
Megha has taken a loan of Rs. 6 lakhs from the bank to purchase a house. The annual interest rate on the loan is 14 per cent and the loan is to be repaid in 12 years in monthly installments. Megha had to submit to the bank, documents showing her employment records and salary before the bank agreed to give her the loan. Show Answer

Q17) Analyze the information given below, considering one of the following options:
A shopkeeper Sudha has to make a payment to the Wholesaler and writes a cheque for a specific amount to the Wholsaler. The wholesaler takes this cheque, and deposits it in his own account in the bank. The money is transferred form one bank account to another bank account in a couple of days. The transaction is completed without any payment of cash. Show Answer

Q18) Find the incorrect option from the following: Show Answer

Q19) Find the incorrect option from the following: Show Answer

Q20) Find the incorrect option from the following: Show Answer

Q21) Directions: In the following questions, A statement of Assertion(A) is followed by a statement of Reason(R). Mark the correct choice as.
Assertion(A): No individual or organization is allowed to issue currency notes in India.
Reason(R): In India, only RBI issues currency notes on behalf of the Central Government. Show Answer

Q22) Directions: In the following questions, A statement of Assertion(A) is followed by a statement of Reason(R). Mark the correct choice as.
Assertion(A): Banks keeps a small proportion of their deposits as cash with themselves.
Reason(R): This is kept to meet the loan requirements of the people. Show Answer

Q23) Directions: In the following questions, A statement of Assertion(A) is followed by a statement of Reason(R). Mark the correct choice as.
Assertion(A): Banks give loans not only to profit-making businesses but also to small cultivators.
Reason(R): The RBI supervises the functioning of formal sources of loans. Show Answer

Q24) Directions: In the following questions, A statement of Assertion(A) is followed by a statement of Reason(R). Mark the correct choice as.
Assertion(A): Periodically, banks have to submit information to the Finance Minister on how much they are lending, to whom, at what interest rate, etc.
Reason(R): The Finance Minister monitors the banks in actually maintaining cash balance. Show Answer

Q25) Directions: In the following questions, A statement of Assertion(A) is followed by a statement of Reason(R). Mark the correct choice as.
Assertion(A): The facility of demand deposits makes it possible to settle payments without the use of cash.
Reason(R): Demand deposits are paper orders which make it possible to transfer money from one person's account to another person's account. Show Answer

Q26) Directions: In the following questions, A statement of Assertion(A) is followed by a statement of Reason(R). Mark the correct choice as.
Assertion(A): Banks charge a higher interest rate on loans than what they offers on deposits.
Reason(R): The difference between what is charged from borrowers and what is paid to depositors is their main source of income. Show Answer

Q27) Which of the following can be considered as modern form of money? Show Answer

Q28) Which of the following has an essential feature of double coincidence? Show Answer

Q29) In a barter system: Show Answer

Q30) Which of the following feature of money acts as an intermediate in the exchange process? Show Answer

Q31) Compared to the formal lenders, most of the informal lenders charge a much ______ interest on loans. Show Answer

Q32) Formal sector loans include loans from
(I) Banks
(II) Moneylender
(III) Cooperatives
(IV) Traders Show Answer

Q33) Banks use the major portion of the deposits to Show Answer

Q34) Why transactions are made in money? Show Answer

Q35) In ________ both parties have to agree to sell and buy each other's commodities. Show Answer

Q36) How would had the shoe manufacturer directly exchanged shoes for wheat without the use of money? Show Answer

Q37) Why barter system is no longer practiced? Show Answer

Q38) An agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future payment. Show Answer

Q39) Which one of the following statements is most appropriate regarding transaction made in money? Show Answer

Q40) Which one of the following is a modern form of currency? Show Answer

Q41) Which among the following authorities issues currency notes on behalf of the government? Show Answer

Q42) In which of the following systems exchange of goods is done without use of money? Show Answer

Q43) Banks provide a higher rate of interest on which of the following accounts? Show Answer

Q44) Banks use the major portion of the deposits to: Show Answer

Q45) What percentage of their deposits is kept as cash by the banks in India? Show Answer

Q46) The informal source of credit does not include which one of the following? Show Answer

Q47) Which one of the following is the new way of providing loans to the rural poor? Show Answer

Q48) Money eliminates the need for double coincidence of wants. Show Answer

Q49) Credit card is a paper instructing the bank to pay a specific amount from the person's account to the person in whose name it has been made. Show Answer

Q50) Informal sector credit includes loans from banks and cooperatives. Show Answer

Q51) Rich households largely depend on informal sources of credit. Show Answer

Q52) In rural areas, the main demand for credit is for building houses. Show Answer

Q53) 'Inculcating saving habits in community' is an objective of Self Help Groups. Show Answer

Q54) In the question given below, there are two statements marked as Assertion (A) and Reason (R). Read the statements and choose the correct option:
Assertion (A): Salim obtains credit to meet the working capital needs of production. The credit helps him to meet the ongoing expenses of production, complete production on time, and thereby increase his earnings.
Reason (R): Credit may pushes the borrower into a situation from which recovery is very painful. Show Answer

Q55) Arrange the following in the correct sequence:
i. The farmers sell their produce to the traders at the price decided by the trader.
ii. Farmer requests for new loan to repay the previous loan and thus in debt trap.
iii. Small farmers take loan from traders.
iv. Crop failed due to drought/pest, etc. Show Answer

Q56) Find the incorrect option: Show Answer

Q57) Find the incorrect option: Show Answer

Q58) Find the incorrect option with regard to the terms of credit: Show Answer

Q59) Arrange the following in the correct sequence on how banks mediate between those who have surplus funds (the depositors) and those who are in need of these funds (the borrowers).
(i) Major portion of deposited money is kept to extend loans to the borrowers.
(ii) Banks charge high rate of interest on loans than they offer on deposits.
(iii) Depositors deposit surplus money in banks.
(iv) small portion of deposited money is kept as cash for depositors who may withdrawn any given day. Show Answer

Q60) Why money is called a 'medium of exchange' ?
Choose the suitable option : Show Answer

Q61) Modern currency is not made up of any precious metals and does not have any use of its own. Still, it is accepted as money because Show Answer

Q62) Raghav has surplus money so he open a bank account and deposits in it. Whenever, he needs money, he can go to his bank and withdraw from there. This kind of deposit' with the banks is known as Show Answer

Q63) In which of the following situations debt trap occurs ? Identify from the given options. Show Answer

Q64) Ram and Shyam are small-farmers who have taken loans of Rs 20000 from different parties. Ram has taken credit at 1.5% per month interest from a trader while Shyam has taken credit at 8% per annum from a cooperative. Analyse the loan information given above, consider the correct option from the following. Show Answer

Q65) Sunil works in a private company, Anil works as a daily wage earner. Both want a credit of Rs 30000. The bank is more likely to give credit to whom ? Show Answer

Q66) Sunita owns a small flower shop near a temple. She wants to expand her shop by keeping exotic flowers and flower bouquets. To whom she should approach for a very short term credit ? Show Answer

Q67) Which of the following is not a formal source of credit from the given options ? Show Answer

Q68) Read the given information carefully and select the most appropriate answer from the given options.
A shoe manufacturer, M Salim has to make a payment to the leather supplier and writes a cheque for a specific amount. This means that the shoe manufacturer instructs the bank to pay this amount to the leather supplier. The leather supplier takes his cheque and deposits it in his own bank account in the bank. The money is transferred from one bank to another account is an couple of days. The transaction is complete without any payment of cash. After the transaction between Salim and Prem .... Show Answer

Q69) Assertion (A) :
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. Show Answer

Q70) Assertion (A) :
Banks keep only a small proportion of their deposits as cash with themselves.
Reason (R) :
Banks in India these days hold about 15 percent of their deposits as cash. Show Answer

Q71) 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 the borrowers and what is paid to depositors is their main source of income. Show Answer

Q72) Assertion (A) :
Credit would be useful or not depends on the risk involved in a situation.
Reason (R) :
The chance of benefitting from credit is highest in agricultural sector. Show Answer

Q73) Assertion (A) :
Collateral is an asset that the borrower owns and use this as a guarantee to a lender until the loan is repaid.
Reason (R) :
Collateral is given as the lender can sell the collateral to recover the loan amount if the borrower fails to repay the loan. Show Answer

Q74) Fill in the blanks from the given options :
In Self Help Groups, .... decide the savings and loan activity option. Show Answer

Q75) 85% of the loans taken by the poor households in the rural areas are from which of the following sources ?
Identify the source from the given options : Show Answer

Q76) Which of the following aspect is correct regarding the Self Help Groups ? Identify the correct option : Show Answer

Q77) Why Self Help Groups (SHG) are growing in popularity ? With reference to the above context, infer the appropriate option. Show Answer

Q78) Assertion (A) :
Members can take small loans from the group itself to meet their needs through Self-Help Groups.
Reason (R) :
SHGs are the building blocks of organisation of the rural poor. Show Answer

Q79) Which is one of the major reasons that prevent the poor from getting bank loans ? Choose the best suitable option : Show Answer

Q80) Which of the following is not included in terms of credit in a bank loan ? Show Answer

Q81) Which of the following are not modern forms of money ? Show Answer

Q82) Which among the following is not a feature of informal sources of credit ? Show Answer

Q83) Which among the following option will be the cheapest source of credit in rural areas ? Show Answer

Q84) Choose the correctly matched pair from the given options : Show Answer