Multiple Choice Questions and Answers on Money and Credit

1. Since money acts as an intermediate in the exchange process, it is called:

(a) value for money (b) exchange value

(c) medium of exchange (d) none of these


2. Modern forms of money include:

(a) paper notes (b) gold coins

(c) silver coins (d) copper coins

3. Who issues currency notes on behalf of the Central government in India?


(a) NABARD(b) Reserve Bank of India (RBI)

(c) World Bank (d) State Bank of India (SBI)

4. Deposits in bank accounts withdrawn on demand are called:

(a) fixed deposits (b) recurring deposits


(c) demand deposits (d) none of these

5. Banks in India these days, hold about _______ per cent of their deposits as cash.

(a) 50 (b) 20

(c) 15 (d) 10


6. Major portion of the deposits is used by banks for:

(a) setting up new branches (b) paying taxes

(c) paying interest on loans (d) extending loans

7. What is the main source of income for banks?


(a) Interest on loans

(b) Interest on deposits

(c) Difference between the interest charged on borrowers and depositors

(d) None of these


8. In rural areas, farmers take credit for?

(a) Family (b) Health

(c) Crop production (d) Education

9. A ‘debt trap’ means:

(a) inability to repay credit amount

(b) ability to pay credit amount

(c) overspending till no money is left

(d) none of these

10. What is the ‘collateral’ demand that lenders make against loans?

(a) Vehicle of the borrower

(b) Building of the borrower

(c) Both (a) and (b)

(d) None of these

11. Terms of credit do not include:

(a) interest rate

(b) collateral

(c) documentation

(d) lender’s land

12. Formal sources of credit do not include:

(a) banks

(b) cooperatives

(c) employers

(d) none of these

13. Informal sector loans include:


(b) State Bank of India

(c) moneylenders

(d) both (b) and (c)

14. Banks and cooperatives need to lend more to borrowers because:

(a) high cost of borrowing from informal sources

(b) borrowers wish to set up enterprises

(c) borrowers need more money but cannot ask

(d) none of these

15. Poor households in urban areas take loans from______ sources.

(a) formal

(b) informal

(c) both (a) and (b)

(d) none of these

16. What prevents the poor from getting bank loans?

(a) Complexity of procedure

(b) Absence of collateral

(c) High rates of interest

(d) None of these

17. In a SHG, most of the decisions regarding savings and loan activities are taken by:

(a) bank

(b) group members

(c) non-government organisation

(d) government

18. What is the name of the success story that met the credit needs of the poor, at reasonable rates, in Bangladesh?

(a) Grameen Bank

(b) Reserve Bank

(c) Cooperative Bank

(d) None of these

Money and Credit Answers for Multiple Choice Questions

1. (c) 2. (a) 3. (b) 4. (c) 5. (c) 6. (d) 7. (c)

8. (c) 9. (a) 10. (c) 11. (d) 12. (c) 13. (c) 14. (a)

15. (b) 16. (b) 17. (b) 18. (a)