Minimalist IAS
← Economy
English हिंदी

Test yourself

Introductory Macroeconomics

Class 12 · Economy

Ch 3 · Money and Banking

Real UPSC Prelims questions from 2016–2026, linked to this book. Try each one first, then open the answer. 2026 answers follow UPSC's provisional answer key.

Prelims 2018 · Q46

Which one of the following statements correctly describes the meaning of legal tender money?

  1. (a)The money which is tendered in courts of law to defray the fee of legal cases
  2. (b)The money which a creditor is under compulsion to accept in settlement of his claims
  3. (c)The bank money in the form of cheques, drafts, bills of exchange, etc.
  4. (d)The metallic money in circulation in a country
Show answer

UPSC's answer: (b)

NCERT answers it: Class 12 Introductory Macroeconomics, Ch 3 (Money and Banking).

Macroeconomics (ch 3): currency notes and coins are called legal tender because no citizen can refuse them in settling any transaction. So (b).

Hindi version: UPSC's official question paper (2018), question 46 ↗

Prelims 2019 · Q64

Which of the following is not included in the assets of a commercial bank in India?

  1. (a)Advances
  2. (b)Deposits
  3. (c)Investments
  4. (d)Money at call and short notice
Show answer

UPSC's answer: (b)

NCERT answers it: Class 12 Introductory Macroeconomics, Ch 3 (Money and Banking).

Macroeconomics (ch 3): a bank's assets are the loans it gives and its reserves. The deposits it takes are its liabilities. So (b).

Hindi version: UPSC's official question paper (2019), question 64 ↗

Prelims 2019 · Q90

The money multiplier in an economy increases with which one of the following?

  1. (a)Increase in the cash reserve ratio
  2. (b)Increase in the banking habit of the population
  3. (c)Increase in the statutory liquidity ratio
  4. (d)Increase in the population of the country
Show answer

UPSC's answer: (b)

NCERT answers it: Class 12 Introductory Macroeconomics, Ch 3 (Money and Banking).

The one fact NCERT doesn't give: When people keep more of their money in banks instead of as cash (a better banking habit), banks have more deposits to lend, so the money multiplier rises.

Class 12 Macroeconomics, ch 3, shows how deposits and reserve ratios create money and why a higher CRR cuts the multiplier. Answer (b).

Hindi version: UPSC's official question paper (2019), question 90 ↗

Prelims 2020 · Q50

If you withdraw ₹ 1,00,000 in cash from your Demand Deposit Account at your bank, the immediate effect on aggregate money supply in the economy will be

  1. (a)to reduce it by ₹ 1,00,000
  2. (b)to increase it by ₹ 1,00,000
  3. (c)to increase it by more than ₹ 1,00,000
  4. (d)to leave it unchanged
Show answer

UPSC's answer: (d)

NCERT answers it: Class 12 Introductory Macroeconomics, Ch 3 (Money and Banking).

How to solve it with NCERT: Class 12 Macroeconomics, ch 3: money supply M1 = currency with the public + demand deposits. Withdrawing ₹1 lakh cuts your deposit by ₹1 lakh and raises your cash by ₹1 lakh, so M1 doesn't change. Answer (d).

Hindi version: UPSC's official question paper (2020), question 50 ↗

Prelims 2020 · Q57

If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do?

  1. 1.Cut and optimize the Statutory Liquidity Ratio
  2. 2.Increase the Marginal Standing Facility Rate
  3. 3.Cut the Bank Rate and Repo Rate

Select the correct answer using the code given below:

  1. (a)1 and 2 only
  2. (b)2 only
  3. (c)1 and 3 only
  4. (d)1, 2 and 3
Show answer

UPSC's answer: (b)

NCERT answers it: Class 12 Introductory Macroeconomics, Ch 3 (Money and Banking).

How to solve it with NCERT: Class 12 Macroeconomics, ch 3: raising the bank rate shrinks money supply and lowering it expands supply. Reserve ratios limit how much banks can lend. An expansionary RBI would therefore cut the SLR and cut rates (1 and 3), but would not raise the MSF rate. Answer (b).

Hindi version: UPSC's official question paper (2020), question 57 ↗

Prelims 2021 · Q9

Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?

  1. (a)Diversion of resources to the purchase of real estate and investment in luxury housing
  2. (b)Investment in unproductive activities and purchase of precious stones, jewellery, gold, etc.
  3. (c)Large donations to political parties and growth of regionalism
  4. (d)Loss of revenue to the State Exchequer due to tax evasion
Show answer

UPSC's answer: (d)

NCERT answers it: Class 12 Introductory Macroeconomics, Ch 3 (Money and Banking).

How to solve it with NCERT: Class 12 Macroeconomics, ch 3 (the demonetisation passage), ties curbing black money to ending tax evasion. The revenue lost to tax evasion is the government's main worry. Answer (d).

Hindi version: UPSC's official question paper (2021), question 9 ↗

Prelims 2021 · Q11

The money multiplier in an economy increases with which one of the following?

  1. (a)Increase in the Cash Reserve Ratio in the banks
  2. (b)Increase in the Statutory Liquidity Ratio in the banks
  3. (c)Increase in the banking habit of the people
  4. (d)Increase in the population of the country
Show answer

UPSC's answer: (c)

NCERT answers it: Class 12 Introductory Macroeconomics, Ch 3 (Money and Banking).

The one fact NCERT doesn't give: When people keep more of their money in banks instead of as cash (a better banking habit), banks have more deposits to lend, so the money multiplier rises.

Class 12 Macroeconomics, ch 3, shows how deposits and reserve ratios create money and why higher reserve requirements cut the multiplier. Answer (c).

Hindi version: UPSC's official question paper (2021), question 11 ↗

Prelims 2021 · Q12

With reference to Indian economy, demand-pull inflation can be caused/increased by which of the following?

  1. 1.Expansionary policies
  2. 2.Fiscal stimulus
  3. 3.Inflation-indexing wages
  4. 4.Higher purchasing power
  5. 5.Rising interest rates

Select the correct answer using the code given below.

  1. (a)1, 2 and 4 only
  2. (b)3, 4 and 5 only
  3. (c)1, 2, 3 and 5 only
  4. (d)1, 2, 3, 4 and 5
Show answer

UPSC's answer: (a)

NCERT answers it: Class 12 Introductory Macroeconomics, Ch 5 (Government Budget and the Economy); Class 12 Introductory Macroeconomics, Ch 3 (Money and Banking).

How to solve it with NCERT: Class 12 Macroeconomics, ch 5: when the government spends more or cuts taxes, aggregate demand rises. That is demand-pull inflation (statements 1, 2 and 4). Ch 3 shows higher interest rates shrink money supply, so rising rates (5) cannot pull demand up. Every option except (a) includes 5.

Hindi version: UPSC's official question paper (2021), question 12 ↗

Prelims 2021 · Q15

In India, the central bank's function as the 'lender of last resort' usually refers to which of the following?

  1. 1.Lending to trade and industry bodies when they fail to borrow from other sources
  2. 2.Providing liquidity to the banks having a temporary crisis
  3. 3.Lending to governments to finance budgetary deficits

Select the correct answer using the code given below.

  1. (a)1 and 2
  2. (b)2 only
  3. (c)2 and 3
  4. (d)3 only
Show answer

UPSC's answer: (b)

NCERT answers it: Class 12 Introductory Macroeconomics, Ch 3 (Money and Banking).

Macroeconomics (ch 3): the RBI stands ready to lend to banks at all times — that is why it is called the lender of last resort. So (b).

Hindi version: UPSC's official question paper (2021), question 15 ↗

Prelims 2022 · Q3

With reference to the Indian economy, consider the following statements:

  1. 1.If the inflation is too high, Reserve Bank of India (RBI) is likely to buy government securities.
  2. 2.If the rupee is rapidly depreciating, RBI is likely to sell dollars in the market.
  3. 3.If interest rates in the USA or European Union were to fall, that is likely to induce RBI to buy dollars.

Which of the statements given above are correct?

  1. (a)1 and 2 only
  2. (b)2 and 3 only
  3. (c)1 and 3 only
  4. (d)1, 2 and 3
Show answer

UPSC's answer: (b)

NCERT answers it: Class 12 Introductory Macroeconomics, Ch 3 (Money and Banking); Class 12 Introductory Macroeconomics, Ch 6 (Open Economy Macroeconomics).

How to solve it with NCERT: Class 12 Macroeconomics, ch 3: when the RBI buys securities it pumps money in, which feeds inflation, so statement 1 is false. Ch 6: the RBI buys or sells dollars to steady the rupee, so it sells dollars when the rupee falls (statement 2). Funds flow to where interest rates are higher, so lower US or EU rates bring dollars into India, which the RBI absorbs by buying them (statement 3). Answer (b).

Hindi version: UPSC's official question paper (2022), question 3 ↗

Prelims 2022 · Q68

In India, which one of the following is responsible for maintaining price stability by controlling inflation?

  1. (a)Department of Consumer Affairs
  2. (b)Expenditure Management Commission
  3. (c)Financial Stability and Development Council
  4. (d)Reserve Bank of India
Show answer

UPSC's answer: (d)

NCERT answers it: Class 12 Introductory Macroeconomics, Ch 3 (Money and Banking).

How to solve it with NCERT: Class 12 Macroeconomics, ch 3, describes the RBI as controlling the country's money supply through the bank rate, open market operations and reserve ratios. Those are the tools that control inflation, and none of the other bodies has them. Answer (d).

Hindi version: UPSC's official question paper (2022), question 68 ↗

← Back to the books

Spotted an error? Tell us — we fix it and record the change here.

NCERT textbooks are published by the National Council of Educational Research and Training (NCERT). Every file comes from NCERT's own website; a full book is joined into one PDF on the reader's device. Minimalist IAS does not store or edit any NCERT file.

Previous-year questions are from UPSC's question papers and answer keys (final keys; for 2026, the provisional key) published on upsc.gov.in.

Minimalist IAS is not affiliated with NCERT or UPSC. Books by other publishers are named for reference only.

NCERT can move or replace a file at any time. We re-check every link each month; if one breaks, tell us.