Deck 5: Money and Inflation

Question 1

Cross cheque means:

A)It has been cancelled
B)Cash cannot be directly drawn from the bank
C)It has two lines drawn in left upper corner
D)(b) and (c) of above

Answer 1

(b) and (c) of above

Question 2

Purchasing power of money during deflation is:

A)Reduced
B)Increased
C)Constant
D)Fluctuating

Answer 2

Increased

Question 3

Velocity of circulation of money means the number of times a unit of money

A)Changes hands daily
B)Changes hands monthly
C)Changes hands annually
D)Changes purchasing power

Answer 3

Changes hands annually

Question 4

The equation of exchange PT = MV was given by:

A)Fisher
B)Crowther
C)Kuznets
D)Keynes

Question 5

When value of money falls, they benefit more:

A)Farmers
B)Industrialist
C)Lenders
D)Debtors

Question 6

When the nation's money supply is Rs. 1200 billion and GDP is Rs. 4800 billion, velocity of circulation money is:

A)0.25
B)4
C)0.4
D)4 billion rupees

Question 7

Which one is equation of exchange?

A)PT = MV
B)PV = MT
C)PM = TV
D)None of these

Question 8

Inflation can be controlled by applying:

A)Monetary and fiscal policies
B)Monetary and Labour policy
C)Fiscal and commercial policies
D)All of the above

Question 9

Inflation is a situation when:

A)Prices of some goods rise
B)General price level rises continuously
C)Prices double every year
D)Prices rise and fall

Question 10

Under normal circumstances, the velocity of circulation of money in a country is:

A)100%
B)Negative
C)Less than 10
D)Zero

Question 11

According to Keynes, demand for money is affected by:

A)Income
B)Rate of interest
C)Literacy rate
D)Both (a) & (b)

Question 12

During inflation:

A)Lenders lose, borrowers gain
B)Borrowers lose, lenders gain
C)Borrowers and lenders both lose
D)All sections of the society gain

Question 13

The quantity demanded of money rises:

A)As the interest rises
B)As the interest rate falls
C)As the supply of money falls
D)As the number of banks rises

Question 14

Which people are most likely to gain during inflation?

A)Those living on pension
B)Those living on their savings
C)Those who are repaying borrowed money
D)Those who have lent money

Question 15

If quantity of money increases 100%, other things remaining constant, value of money changes by:

A)Increases by 100%
B)Decreases by 100%
C)Decreases by 200%
D)Does not change

Question 16

For the economy, prices are beneficial:

A)Falling slowly
B)Rising slowly
C)Rising fast
D)Falling fast

Question 17

Value of money means:

A)Gold purchased by money
B)General purchasing power of money
C)Importance of money
D)Demand for money

Question 18

Value of money and supply of money are related:

A)Inversely
B)Directly
C)Govt. law
D)Are not related

Question 19

They are not affected badly by rising prices:

A)Salaried persons
B)Businessmen
C)Debtors
D)Importers

Question 20

Inflation:

A)Makes distribution of income equal
B)Makes distribution of income unequal
C)Has no effect on distribution of income
D)Affects only industrial sector

Question 21

It is assumption of quantity theory of money:

A)Quantity of traded goods increases
B)Velocity of circulation of money constant
C)Govt. imposes new taxes
D)(a) and (b) of the above

Question 22

If we put this letter in the blank space, we get quantity theory of money PY = M

A)S
B)T
C)V
D)A

Question 23

In the equation PY = MV showing quantity theory of money. Y represents:

A)Year of measurement of national income
B)National income
C)Tax revenue of the govt
D)(a) and (c) of above

Question 24

Demand-pull inflation may be caused by:

A)An increase in costs
B)A reduction in interest rates
C)A reduction in government spending
D)An outward shift in aggregate supply

Question 25

Inflation:

A)Always reduces the cost of living
B)Always reduces the standard of living
C)Reduces the price of products
D)Reduces the purchasing power of a Rupee