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Chapters
1: Microeconomics and Macroeconomics: Introduction
2: Demand and Law of Demand
3: Theory of Consumer Behaviour: Marginal Utility and Indifference Curve Analysis
4: Elasticity of Demand
5: Supply - Law of Supply and Price Elasticity of Supply
6: Market Mechanism: Equilibrium Price and Quantity in a Competitive Market
7: Laws of Returns - Returns to a Factor and Returns to Scale
8: Cost and Revenue Analysis
9: Forms of Market
10: Producer's Equilibrium
11: Determination of Equilibrium Price and Output Under Perfect Competition
SECTION 2: THEORY OF INCOME AND EMPLOYMENT
12: Theory of Income and Employment
SECTION 3: MONEY AND BANKING
13: Money: Meaning and Functions
▶ 14: Banks: Commercial Bank and Central Bank
SECTION 4: BALANCE OF PAYMENTS AND EXCHANGE RATE
15: Balance of Payments and Exchange Rate
SECTION 5: PUBLIC FINANCE
16: Fiscal Policy
17: Government Budget
SECTION 6: NATIONAL INCOME
18: National Income and Circular Flow of Income
19: National Income Aggregates
20: Methods of Measuring National Income
SECTION 7: PROJECT WORK
21: Project Work
22: Model Short Answer Questions
![Frank solutions for इकॉनॉमिक्स [इंग्रजी] इयत्ता १२ आईएससी chapter 14 - Banks: Commercial Bank and Central Bank - Shaalaa.com](/images/economics-english-class-12-isc_6:872f47036b5c4267ae061d4279703803.jpg "Frank solutions for इकॉनॉमिक्स [इंग्रजी] इयत्ता १२ आईएससी chapter 14 - Banks: Commercial Bank and Central Bank")
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Solutions for Chapter 14: Banks: Commercial Bank and Central Bank
Below listed, you can find solutions for Chapter 14 of CISCE Frank for इकॉनॉमिक्स [इंग्रजी] इयत्ता १२ आईएससी.
Frank solutions for इकॉनॉमिक्स [इंग्रजी] इयत्ता १२ आईएससी 14 Banks: Commercial Bank and Central Bank TEST YOURSELF QUESTIONS [Pages 291 - 296]
Select correct option for each of the following questions. (1 mark each)
Which one of the following is not a feature of demand deposits?
Money from these deposits are payable on demand.
Money from these deposits can be withdrawn by cheques without any restrictions on the amount or number of withdrawals.
Demand deposits accounts are mostly held by traders and businessmen.
Banks pay a nominal interest on deposits on these accounts.
Which of the following are the features of time deposits?
Money in these accounts is deposited for a specified period
These deposits are not payable on demand
The deposits in these accounts do not enjoy cheque facilities
All these features
Demand deposits include which of the following?
Saving Account deposits
Current Account deposits
Fixed Deposits
All these deposits
Which of the following is not the agency function of the commercial banks?
Making and collecting payments on behalf of their customers.
Providing lockers facilities.
Acting as the agent of their customers in the sale and purchase of stocks and shares.
Providing the services of buying and selling foreign currency.
Which of the following is not a limitation of credit creation by commercial banks?
Cash Reserve Ratio
Fiscal policy
Business conditions
Banking habit
Deposit Multiplier (Credit Multiplier) equal:
Reserve Ratio (RR)
$$\frac{1}{RR}$$
$$\frac{1}{1 - RR}$$
None of these
If Reserve Ratio is 10% and Primary deposit is ₹ 1250 crores, the total deposits created by commercial banks will be ______.
₹ 13,500 crores
₹ 10,000 crores
₹ 12,500 crores
₹ 11,500 crores
Which of these is not a function of a central bank?
Accepting deposits from public at large
Issuing currency notes
Banker to banks
Maintaining foreign exchange reserves
Which one of the following is not a quantitative instrument of monetary policy?
Bank rate
Margin requirement
Open market operations
Cash Reserve Ratio
Which one of the following is not a qualitative (selective) instrument of monetary policy?
Credit rationing
Moral suasion
Bank rate
Margin requirements
Repo rate refers to ______.
The rate of interest at which RBI lends to the commercial banks
The rate of interest at which RBI borrows from the commercial banks
The rate of interest at which RBI lends to corporate houses
None of these
Yes Bank was facing financial crisis recently due to the crisis of non-performing assets. It approached the RBI for help. What role can RBI play in such a situation?
Acting as regulator of the commercial bank
Acting as banker to the commercial banks
Acting as advisor to the commercial banks
Acting as lender of the last resort
Between May 2022 and January, Repo Rate was hiked six times by RBI. What was the primary reason for such a policy?
Controlling inflation
Promoting economic growth
Reducing unemployment
None of these
In order to control inflation, the Central Bank need to ______.
Increase Repo Rate
Increase Reserve Ratio
Both increase repo rate and increase reserve ratio
None of these
Identify the correct pair of items (combination) from the combinations given in Column 1 and Column 2.
Column 1 Column 2 Issue of currency Government of India Column 1 Column 2 Banker to the government State Bank of India Column 1 Column 2 Controller of credit Reserve Bank of India Column 1 Column 2 Statutory Liquidity Ratio (SLR) Government of India
Given below are two statements marked as Assertion (A) and Reason (R). Read the statements carefully and choose the correct option.
Assertion (A): Demand deposits with the banks are not legal tender.
Reason (R): People have the right not to accept payment through cheques.
Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation for Assertion (A).
Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation for Assertion (A).
Assertion (A) is true and Reason (R) is false.
Both Assertion (A) and Reason (R) are false.
Match the correct pairs of items in Column 1 and Column 2.
| Column 1 | Column 2 |
| (1) Cash Reverse Ratio | (a) The rate of interest at which RBI lends to commercial banks |
| (2) Overdraft facility | (b) Money from this can be withdrawn on demand without any restriction on withdrawal. |
| (3) Repo rate | (c) Percentage of total deposits kept in cash by commercial banks |
| (4) Current account | (d) Facility of withdrawing more money than the money deposited in the bank |
Very Short Answer Questions (2 marks each)
What is a commercial bank?
Explain the different types of banks.
Explain three important functions of a commercial bank.
Name the types of deposit accounts of the commercial banks.
Explain discounting bills of exchange as one of the functions of the banks.
Distinguish between:
Demand deposit and Time deposit
What is meant by an overdraft facility given by a commercial bank?
Name the types of loans given by the commercial banks.
What is a credit multiplier?
Point out any three limitations to the credit creation by commercial banks.
State two points to illustrate the role of a bank in the economy.
What is a central bank?
How is a central bank a banker to the banks?
Central bank is the lender of the last resort. Explain.
Explain the ‘Clearing House Function’ of the central bank.
Bring out the methods of credit control.
What is the bank rate?
Explain Open Market Operations as a measure to control inflation.
What is meant by ‘Cash Reserve Ratio’?
What is moral suasion?
Explain the regulation of consumers credit.
What is monetary policy?
Distinguish between CRR and SLR.
What is the repo rate?
What is the reverse repo rate?
Short Answer Questions (3 marks each)
What is Bank?
Explain the different types of banks.
Name the types of deposit accounts of the commercial banks.
Explain three important functions of a commercial bank.
Name the types of loans given by the commercial banks.
Name the types of deposit accounts of the commercial banks.
Explain briefly the five agency functions of a commercial bank.
Mention two differences between the Central Bank and a Commercial Bank.
Explain the functions of the Central Bank.
How does the central bank act as the banker to the government?
Explain the functions of the Central Bank.
Explain the functions of the Central Bank.
Explain the functions of the Central Bank.
Explain the functions of the Central Bank.
Explain the functions of the Central Bank.
Explain the ‘bank of issue’ function of a central bank.
Explain the banker’s bank function of the Central Bank.
How does the central bank act as a lender as the last resort?
Explain the functions of the Central Bank.
Explain the ‘Clearing House Function’ of the central bank.
Differentiate between quantitative and qualitative methods of credit control.
Describe two quantitative credit control measures of the Central Bank.
Briefly explain how Cash Reserve Ratio can be used to control credit.
How does the Central Bank control credit through SLR?
Discuss two qualitative methods of controlling credit by a central bank in an economy.
What is the repo rate?
What is the reverse repo rate?
Long Answer Questions (6 marks each)
Explain three important functions of a commercial bank.
Write the mechanism of credit creation by commercial banks.
Point out any three limitations to the credit creation by commercial banks.
How do commercial banks create credit?
Do commercial banks enjoy unlimited power to create credit? Discuss.
How do commercial banks create credit?
State two points to illustrate the role of a bank in the economy.
Explain the functions of the Central Bank.
Explain the functions of the Central Bank.
Describe two quantitative credit control measures of the Central Bank.
Differentiate between quantitative and qualitative methods of credit control.
Briefly explain any two quantitative credit control instruments
Briefly explain any two qualitative credit control instruments.
Briefly explain two qualitative methods of credit control adopted by this institution.
Passage Based Questions (8 marks each)
Read the passage below and answer the questions that follow.
|
On the basis of an assessment of the macroeconomic situation in the economy, the Monetary Policy Committee of the RBI takes decisions about various policy rates. In recent years, these rates have been reduced to stimulate economic growth in the economy. Consequently, repo rates, reverse repo rates and cash reserve ratios were reduced. However, in view of the persistent inflationary pressure in the economy, the MPC has decided to increase the policy rates-mainly the repo rate to 4.9 per cent and Bank Rate to 5.1 per cent ensure that inflation remains within the target. CMPC minutes of June 8, 2022) |
- What is the function of the Monetary Policy Committee? [2]
- What are the two objectives of MPC? [2]
- Distinguish between repo rate and reverse repo rate. [2]
- Distinguish between Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). [2]
Read the passage below and answer the questions that follow.
|
Monetary Policy Committee (MPC) of RBI unanimously voted for a pause after six cumulative hikes in the bench Repo Rate cumulatively by 2.5 per cent (250 basic points) in the April, 2023 Review of Monetary Policy as inflation showed some signs of moderation. Members of MPC also pointed out the impact of rising rates on the growth outlook to defend a pause on the rise in the Repo rate. The RBI Governor also pointed out the delayed impact of previous rate hikes on economic growth and price pressure. He stated that the cumulative impact of monetary policy actions over the last one year is still unfolding and needs to be monitored closely. (The Economic Times, 22 April 2023) |
- What is monetary policy? [1]
- Who is entrusted with the responsibility of formulating monetary policy? [1]
- Distinguish between repo rate and reverse repo rate. [2]
- Distinguish between quantitative and selective instruments of credit control. [2]
- State any two functions of RBI. [2]
Thinking Beyond...
What is ‘quarterly monetary policy review’ of the Reserve Bank of India?
A few years back, there was a difference of opinion between the RBI Governor and the Finance Minister. What was the basic point of difference?
What is the real interest rate?
The Indian government decided to demonetise the 1000 and 500 rupee notes on November 8, 2016. What do you understand by the policy of demonetisation?
Solutions for 14: Banks: Commercial Bank and Central Bank
Frank solutions for इकॉनॉमिक्स [इंग्रजी] इयत्ता १२ आईएससी chapter 14 - Banks: Commercial Bank and Central Bank
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Concepts covered in इकॉनॉमिक्स [इंग्रजी] इयत्ता १२ आईएससी chapter 14 Banks: Commercial Bank and Central Bank are Introduction to Money and Inflation, Concept of Money, Features of Money, Barter system, Difficulties of Barter System of Exchange, Evolution of Money, Qualities of Good Money, Modern Forms of Money, Functions of Money, Primary Functions, Secondary Functions, Contingent Functions, Importance of Money, Supply of Money, Measures of Money Supply, Inflation, Types of Inflation, Introduction to Banking System, Types of Bank, Functions of Commercial Bank, Central Bank, Functions of Central Bank, Methods of Credit Control by the Central Bank, Quantitative Methods of Credit Control by the Central Bank, Qualitative Methods of Credit Control by the Central Bank, Difference Between the Central Bank and the Commercial Banks, Role of Banks in the Economy, Indian Monetary System, Constitutents of Money Supply, Reserve Bank of India's Approach of Money Supply, Factors Affecting Money Supply, Commercial Banks, Process of Credit Creation by Commercial Banking System, Factors Affecting Credit Creation, High Powered Money, Classification or Structure of Commercial Banks in India, Components of Money Supply, Evolution of Central Bank, Need for a Central Bank, Importance of Central Bank.
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