NCERT Class 12 Economics-II Class 12 Chapter 3 Questions And Answers Money and banking

WhatsApp Group (Join Now) Join Now
Telegram Group (Join Now) Join Now

NCERT Class 12 Economics-II Class 12 Chapter 3 Questions And Answers, Economics-II Class 12th Chapter 3 Notes | Economics-II Class 12 Chapter 3 Questions And Answers In Hindi Easy PDF

Money and banking

Definition of currencyDevelopment of money – money due to needs and greater need of exchange developed.The primary function of money – the development of money has removed all the limitations of the barter system.

(i) Legal Definition – Money is any thing which is declared by law to be money.goes.

(ii) Functional Definition – Money is anything that serves as a medium of exchange, measure of value, store of value and value of deferred payment.

The functions of money are as follows:

(i) It is a medium of exchange,

(ii) Money is the measure of value,

(iii) It is a measure of deferred payments,

(iv) It is a store of value.

Order Money (Flat Money) – That currency is called on the basis of the order of the issued on

Fiduciary Money – the currency based on the payee andThere is mutual trust between. Perfect Working Money – Money whose monetary value = commodity value.

Credit-money – monetary value is greater than commodity value. The Indian monetary system is based on paper money.

Supply of Money The supply of money is a stock concept. The stock of money available with the public at any point of time is called money supply. Meaning of currency- That thing which can be used as a normal medium of exchange is called currency.

Money Supply – Money supply or money supply refers to the amount of money available in an economy.

Indian currency – The main currency of India is paper currency. The Reserve Bank of India has the right to issue paper in India. Issue of all paper currency except one rupee noteIt is done by the Reserve Bank.

Commercial bank – receiving currency and paying the amount on the demand of the customersThe institutions are called commercial banks.

Central Bank – Central bank is the bank which is established in a country for credit control and issue of currency notes.

Definition of Central Bank – The central bank is the bank that controls the economy of the entire nation and has a monopoly in issuing notes and setting interest rates for banks. Reserve Bank of India – Registration of Reserve Bank of India as Shareholders’ Bank

NCERT Class 12 Economics-II Class 12 Chapter 3 Questions And Answers

Chapter NameMoney and banking
Chapter numberChapter 3
Part B
Medium English
Study MaterialsQuestion Answers & Notes
Download PDFNcert class 12 economics-II chapter 3 pdf
Money and banking


1. Write one major function of money.

Ans. The main function of money is the medium of exchange. Using it as a medium of exchange saves both time and labor. of currency

2. What is statutory or legal currency?

Ans. The currency that is issued on the orders of the government is called statutory or legal currency.They say . No one has any doubts about the acceptability of legal tender.

3. Explain the meaning of ‘money as store of value’.

Ans. The holder of the currency can buy the desired goods or services anywhere at any time.Because money has the property of legal acceptability. therefore value storage in currencyThe capacity of is sustainability.

4. What is bank rate?

Ans. The rate at which the central bank of the economy grants loans or advances to commercial banks or settles their bills by discounting them.

5. Write the meaning of statutory liquidity ratio.

Ans. The rate at which commercial banks have to maintain minimum reserve cash deficit to meet the demand for demand deposits is called bank rate.

6. Write the meaning of Cash Deposit Ratio (CRR).

Ans. The rate at which commercial banks have to deposit some part of their deposits with central banks is called Cash Deposit Ratio (CRR).

7. Write the meaning of commercial bank.

Ans. Commercial bank means that bank which does banking with the aim of earning profit. Businesses accept deposits and create credit by lending to the public.

8. Write the meaning of overdraft.

Ans. facility by which the account holder can withdraw more than the deposited amountIt is called overdraft facility.

9. Write the meaning of loan and advance.

Ans. Loan or advance granted by the bank to the borrower shall mean a fixed amount in his from the untransferred amount which the borrower can use as per his wish.

10. Write the meaning of credit.

Ans. Loan or finance available to another person, firm, bank or organization etc.Karana is called credit.

11. Write the meaning of primary deposit.

Ans. The amount of cash deposited by the people in the bank is called primary deposit.

12. Write the meaning of secondary deposit.

Ans. When the bank deposits the amount in the customer’s account instead of giving cash loan to the borrower, it is called secondary deposit.

13. Write the relation between cash deposit ratio and credit factor.

Ans. There is an inverse relationship between the cash deposit ratio and the credit factor.

14. Is barter system a function of money?

Ans. No, the barter system is not a function of money.

15. Write the functions of money.

Ans. Money has the following functions-

(i) Money acts as a medium of exchange.

(ii) Money serves as a measure of value.

(iii) Money is a measure of deferred payments.

(iv) Money is a store of value.

16. Explain the need for double coincidence of wants.

Ans. In order to meet the daily needs, different people often exchange different types of goods among themselves. Therefore, what belongs to one person belongs to another person.Fulfills the need and the object of the second person fulfills the need of the first person.

17. Briefly describe credit money.

Ans. The monetary value of such currency exceeds the commodity value contained in it. In other wordsThe face value on this currency is more than the value of the article from which this article is made. Credit currency is of the following types-

(i) token coins,

(ii) representative symbolic dra,

(iii) Notes issued/circulated by the Central Bank,

(iv) Deposits with banks.

short answer type questions

1. Explain the costs of barter trade.

Ans. The unnecessary costs incurred in doing business through barter are called business costs of barter. These costs are as follows

(i) Search cost The buyer loses the person who can exchange his product for the desired item. The time taken in this search is called the search cost.

(ii) Uselessness of waiting – The trader wants to sell the item. He has to wait in search of a person who wants to buy it. this work multiis complex and time-consuming because there are many people with the right people and

Very difficult to find.

2. Explain the function of money as a unit of value with an example.

Ans. In an economy, money is the unit in which goods and services are denominated. That’s why currency is also called the unit of taking. The value of a commodity or service in the form of currency of the economy is called its price.

 The price of a commodity or service means the number of monetary units received in exchange for one unit of the commodity. For example, if the cost of a shirt is Rs.125, it means that one can get a shirt for Rs.125.

Expressing the value of all goods and services in monetary units helps in determining the price of goods and services among themselves. For example, if the cost of shirt and pant are Rs.125 and Rs.250 respectively.If it is, then the cost of one pant will be that of two shirts. This makes the task of accounting easy. The value of money is the purchasing power which is the inverse of the price level.

3. State the role of money as a store of value.

Ans. After taking the unit of value and the means of payment, money can easily perform the function of store of value. The holder of the currency is assured that the owner of the goods and services will accept the currency in exchange for them. That is, due to the quality of general acceptance in money, the holder of money can buy any desired thing in exchange for it. Thus, money acts as a store of value.

Apart from money, fixed assets like land, buildings and financial assets like savings, debentures etc. also have the property of store of value and earn some income from them. But their owner needs care and maintenance, they are less liquid than currency, and their value may decrease in the future. Hence money is better than other things as a store of value.

4. Explain the M1 concept of money supply.

Ans. The M1 concept of money supply is more comprehensive than M2. It was rendered by Milton Friedman. M is also called the composite money instrument. Because it expresses the Aggregate Monetary Resource (AMR) of the economy.

In this, M and net time deposits of banks are included. In the economy M1, the liquidity of money is less than M2 but more than M2. currency held by the public with banksM1 also changes due to negative changes in deposits and bank deposits.M, M deposits net fixed deposits with the bank.

3. What are the main functions of money in an economy?

Ans. Money has the following functions in an economy:

(i) the operation of a unit of value or a unit of account.

(ii) Money acts as a medium of exchange in various types of transactions.

(iii) Serves as a standard for deferred payments in future.

(iv) Purchasing power and store of value.

6. What are the difficulties of barter? 

Ans. The difficulties of barter are as follows- (i) Absence of universal unit of measurement of the main of goods and services, due to this, there arises a gap in the development of suitable system of accounting.

(ii) The basis of exchange is bilateral coincidence. always and everywhere two sides in dealingIt is impossible to co-ordinate the desired combination between.

(iii) The following difficulties may arise in future in respect of deferred payments-

(a) There may be a dispute between the two parties regarding the properties of goods and services to be provided as payment in future.

(b) There may be a disagreement on the object of payment in future.

(c) more in value of the goods to be paid at the time interval of the payment contractIt is possible

(iv) Difficulty in storing normal purchasing power.

7. What is money supply?

Ans. The sum of all types of money in the economy is called money supply. It is necessary to take care of two things in the supply of money.

(i) Money supply is a stock. It represents the total amount of money available at a point of time.

(ii) Stock of currency means stock held by the public. public holding stockis less than the total stock.

The Reserve Bank of India publishes data on four alternative values ​​of money supply in the country. These values ​​are (M, M2, M3, M2 ) respectively. = Currency with the public + Demand deposits of the public in the banksWhere

M2 = M + Savings deposits in post office savings banks. M3 = M2 + Net time period schemes of banks

M4 = M3 + all deposits of Post Office Savings Organization

8. What type of monetary system is followed in India?

Ans. At present, the system of paper currency value or managed currency value is being followed in India. The standard monetary system of India is the primary currency. Using this, our government settles all the obligations. The Reserve Bank of India has accepted the standard currency made of paper.

Large transactions are done through currency, but coins made of cheap metals are used for small payments that are legally acceptable.

Reserve Bank of India issues all currency notes except one rupee notes and coins. One rupee notes and coins are issued by the Government of India.

Currency issue system is the minimum reserve system in India. PostureAs such cannot be converted into valuable metal i.e. the currency of India is inconvertible.

9. What are the functions of commercial banks?

Ans. Following are the functions of commercial banks-

(i) Acceptance of deposits from the general public.

(ii) Advances and loans to customers.

(iii) Overdraft.

(iv) deduction of hundis.

(v) Investment of deposits.

(vi) Banks also act as agents.

(vii) Other works like-

(a) Buying and selling of foreign currency.

(b) Issue of tourist cheques, gifts.

(c) Safekeeping of valuables in lockers. (d) Undertaking to buy unsold shares on issue of new shares etc.

To arrange for the sale of securities among investors.

10. What are the different measures of currency stock?

Ans. The Reserve Bank of India has adopted both narrow and broad approaches to the measurement of money.Have adopted These are as follows-

(i) M, includes—

(a) Currency notes and coins with the public

(b) Deposit demand.

(c) Other deposits with the Reserve Bank.

(ii) M2 In this the following are included-

(a) m1

(b) Make savings deposits with post offices.

(iii) M, it includes the following-

(b) Time deposits of commercial and co-operative banks. This is a comprehensive view of money.

(iv) M4 It includes the following-

(a) M3

(b) Excluding Postal Savings Organization Net Deposits (NSC).

11. Write the difficulties of barter.

Ans. Barter difficulties

(1) In this system, there is no universal unit of measurement of value of goods and services. Hence barter is a hindrance in the development of a suitable system of accounting.

(ii) Double coincidence of wants is the basis of exchange. two sides in practiceIt is very difficult to have a harmony of mutually desired combination always and everywhere.

(iii) There is difficulty in settling deferred payments. It is difficult for all transactions between two parties to be settled simultaneously, therefore in barter system there may be disagreement regarding deferred payments, type, quality, quantity etc. of the commodity.

12. Write the meaning of Nyaya Mudra.

Ans. Justice currency means that currency which is based on mutual trust between the payer and the payee. For example, check is an example of trust currency. Accepting it for payment depends on the mutual trust between the payee and the drawer.

13. Write the meaning of nominal and commodity value of money.

Ans. Face value – The value written on a letter or metal currency is called currency.called face value. For example, the face value of Rs.500 note is Rs.500. It happens .

Commodity Value – The value of the substance from which money is made is called commodity value. For example, the metal value of a silver coin is equal to the value of the metal used in the making of that coin.

14. Write the meaning of credit money.

Ans. A currency whose face value is more than its metal value is called credit. Like- 100 rupees of Indian currency. The face value of a K note is much less than its face value.

15. Coins are limited legal tender in India while paper notes are unlimited legal tenderIs. Write the meaning of this statement.

Ans. Indian coins can be used to settle payments only up to a limit, whereas notes can be used to settle payments in unlimited quantities.

6. What is the system of issuing notes in India?

Ans. The system of issuing notes in India is called minimum security system.A minimum amount of gold and foreign currency is kept in the reserve for the currency issued.

17. Explain the minimum security system in India.

Ans. Minimum security system is adopted for issuing currency in India.Gold worth Rs 115 crore and foreign securities worth Rs 85 crore in the safe fund.In this way, after a total reserve of Rs 200 crore, the Central Bank of India

issues currency.

18. Who supplies currency in India?

Years, Supply of currency in India is-

(i) Government of India. (ii) Central Bank (iii) Commercial Bank. 19. What is a savings account? Ans. In this the inactive amounts of deposits are credited. Lowest interest in this accountThis is achieved because depositors can withdraw money from this account at any time.

Normally the depositor can withdraw the amount deposited in this account 100 times in a year.

20. How do commercial banks transfer funds?

Ans. Commercial banks are helpful in sending money from one place to another.Are . This amount is sent from one place to another with the help of letters of credit, such as cheques, drafts, bills of exchange etc.

21. Explain the meaning of Regional Rural Bank.

Ans. On October 2, 1975, 5 Regional Rural Banks were established. their work areaconfined to one state or two districts. They provide loans to small and marginal farmers, agricultural labourers, rural artisans, small entrepreneurs, and businessmen engaged in small business. The objective of these banks is to develop the rural economy. These banks help in the development of agriculture, small scale industries, commerce, trade and other activities in rural areas.


1. How do the difficulties of barter end with the use of money?

Ans. The difficulties of barter end with the use of currency in the following way-

(i) There is no universal unit to measure the value of services and goods in barterIs. Money is used as a universal unit to measure the value of goods and services using money. Therefore, accounting has developed with the use of money.

(ii) There is unnecessary loss of money and time in barter search. Using currency in transactions makes the process of exchange easier. currency exchangeOfDirect exchange is done in less time and easily without searching for a match.

(iii) In barter, on deferred payments in the future, the merits of the commodity, theAnd disagreement arises in the context of the value of the object. but suspended from the use of currencyPayments are measured in terms of currency.

(iv) Storage of purchasing power is not possible in barter exchange. But with the use of money, the work of store of value is done easily. Money can be used to buy goods and services at any time. Thus money acts as a store of value.

2. How is currency classified?

Ans. The classification of currency is done on the basis of currency form and value of the commodity. These classifications are as follows-

(i) Completely idolized currency-The monetary value of this type of currency would be equal to the commodity valueIs . Their non-monetary use value also remains equal to the monetary use value, such as gold and silver coins, this type of currency was prevalent in ancient times.

(ii) Representative full idol value issue This type of currency is paper. This currency comes into circulation when the amount of full physical currency or gold and silver is deposited in the store. In other words, it is a receipt for the amount of fully denominated currency or precious metals such as gold and silver deposited in a warehouse.

But the amount printed on this currency is equal to that of the currency itself.There is no value. But the amount printed on this currency expresses the same currency.As much as the commodity value of that currency. By using this type of currency, precious and heavy metalsdoes not have to be carried here and there.

(ii) Credit money – The monetary value of this type of money is more than the commodity value. In other words, the value of the thing used to make money is much less than the face money value. The following are the types of credit money:

(a) token coins,

(b) representative token currency,

(c) currency notes issued by the central bank,

(d) Deposits with banks.

3. Briefly explain the functions of Central Bank in India.

Ans. The Reserve Bank of India is the central bank in India. It has the following functions-

(i) Issuance of currency – Only RBI has the authority to issue currency in India. Only the Finance Ministry of the Government of India issues one rupee notes, the RBI does the work of issuing all other types of notes and minting coins. RBI has to do the work of bringing coins and all types of notes into circulation. RBI issues currency by keeping minimum protected funds (in the form of gold, silver etc. precious metals and foreign currency worth Rs. 200 crores).

(ii) The banker to the government is the RBI, the banker of the central and all the state governments. All government current account cash funds are deposited with the RBI. RBI also paid by the governmentdoes and also accepts payment. RBI settles. RBI Government if needed

Also gives short term loan to It acts as a bank advisor regarding the loan size, rate of interest, time and other terms. In short, the central bank is the advisor to the government on banking and financial matters.

(iii) Bank of banks and supervisor of banks, RBI maintains a portion of cash reserves of all banks, provides short term cash to banks, undertakes centralized clearing and remittances Is . Lending to commercial banks using deposits in the cash reserve with the RBI as the last resort

gives. RBI supervises, regulates and controls the business affairs of all the banks. Licensing of banks, expansion of branches, liquidity of assets, management, merger etc. are also done by RBI.

(iv) Control of money supply and credit RBI controls money and credit supply in India controls. For this purpose RBI formulates monetary policy.

monetary policyTakes the following measures in the form of instruments-

(a) Bank rate policy-Determining the rate of interest for lending to the bank.

(b) Open market operations – sale and purchase of government securities with commercial banksDoing .

(c) Change in Reserve Fund Ratios are of two types-

(i) Cash Deposit Ratio (CRR).

(ii) Statutory Liquidity Ratio (SLR).

(iii) Rationing or encouragement of credit.

(iv) Moral insistence.

4. Discuss the role of commercial banks in the economy.

Ans. The main function of the banking business is to accept deposits and lend. bank peopleAlso accepts deposits withdrawable by common check. The following are the functions of commercial banks-

(i) Acceptance of deposits- Commercial banks accept deposits from general public in three types of accounts.accepts. These accounts are as follows-

(a) Current Account Deposit- These types of accounts are meant for business people. deposited inThe bank does not have to pay interest on the amount. Deposits in these accounts are payable byIs. The bank charges a fee on these.

(b) Fixed Deposits – These types of deposits are accepted for a fixed period of time. These demands are not accumulated. Banks have to pay interest on these deposits.

(c) Savings account deposits are also demand deposits along with fixed cheques. these depositsBut interest is also paid.

(ii) Lending- Commercial banks use deposits other than reserve funds for lending. Banks get income from this. Commercial banks provide the following types of loans-

(a) Cash Credit- Depending upon the creditworthiness of the customer, commercial banks fix the limit of lending to their customers. Cash credit is determined on the basis of the assets and stock of the customers. The customer pays interest on the amount used. If the loan is not repaid, the bank can take possession of the customer’s asset.

(b) Demand loan – Such loan can be called back by the bank at any time. The loan amount is deposited in the borrower’s account in lump sum. Interest is also applied immediately. These types of loans are generally taken by stockbrokers.

(c) Short term loans. These types of loans include personal loans, and improvised worship loans andare given to priority sectors. Transfer to the account of the account holder on the amount of this loanInterest is applied immediately after it is due.

(iii) overdraft in excess of the customer deposit in the current account up to a certain limit avail the facility of issuing cheques. The rate of interest on this is lower than that of cash credit because financial assets are accepted as collateral for this purpose, which are easy to liquidate.

(iv) Acceptance of the liability to pay the value of goods received through hundis.Doing is called Hundi. By taking some commission on the amount of bank hundi, the remaining amount will be given to the hundi holder.pays to

(v) Investment of deposits – commercial banks in Government securities, approved securitiesinvest in etc. These securities are simple and easy to encashIt happens.

(vi) As an agent- Commercial banks are also performing the work of commission agent very well these days. Banks provide many services to their customers by taking commission. Such as transfer of cash funds, cash collection, purchase and sale of securities, payment of bills and installments, trustee and management advisory services, etc.

(vii) Other work- (a) Buying and selling of foreign currency, (b) taking tourists and gifts, (c) keeping valuables safely in lockers etc.

5. What is credit exchange? Briefly explain the different types of credit money.

Ans. Credit money is a type of money whose monetary value is greater than its commodity value. Is. The value of the material from which money is made is less than the value of fiat money. There are many types of credit money. Like- (i) Symbolic coins 25 paise, 50 paise, 1 rupee, 2 rupee and 5 rupee coins are symbolic coins in India. The monetary value of these coins is less than the value of the metal in them. For example, it is very difficult to get 2 rupees by selling the metal obtained by melting a coin of 2 rupees.

(ii) Representative token currency – It is the acknowledgment receipt of token coins or stores of occurs. coin and silver reserves less than paper money valueIt happens.

(iii) Prevailing notes issued by central banks- Nowadays this type of currency is more prevalent in all the economies of the world. RBI does the work of issuing currency notes in India. The governor of the Reserve Bank of India promises to pay the amount of the note to the holder


(iv) Deposits with Banks-General public makes deposits in different types of accounts in banks. These deposits are liabilities of the banks. Customers can transfer these mutually through cheques. Banks do not keep the same amount of money in their reserve funds as they do in checking deposit accounts. In this way, banks run the work of currency with check deposits.

Geography भूगोल
Political science राजनीति विज्ञान
English SubjectResult
Hindi SubjectHistory answer keys
Sociology समाज शास्त्र


Q. Write the cost of exploration in barter.

Ans. In the barter system, such an alternative is sought in which the thing needed by one person is with the second person and the thing needed by the second person is with the first person. Finding such an alternative takes both time and energy. This is called the cost of exploration.

Q. Write the meaning of commercial bank.

Ans. By commercial bank is meant the bank which works for the purpose of earning profit. These are called mixed capital banks. They deal in currency credit



Leave a Comment