Chapter 13 - Central Banking
Economics Solutions for Class 12 Commerce Economics
Fill in the blanks with appropriate alternatives given in the brackets.
1. Central bank has the __________ of note issue. (monopsony/monopoly/duopoly/oligopoly)
2. The central bank acts as a ____________ of cash reserves of the country. (head/ leader/ custodian/ locker)
3. Bank Rate is also called __________ rate. (rediscount/ market/ general/ exchange)
4. ____________ is the apex body of the monetary and banking systems of the nation's economy. (Commercial bank/ Central bank/ Government/ Co-operative bank)
5. The Reserve Bank of India was established in _____________. (1937/ 1939/ 1935/ 1934)
Answer:
1. Central bank has a monopoly of note issue.
Explanation:
In India Central bank has the sole authority to issue currency notes. The central bank backs the currency it issues.
2. The central bank acts as a custodian of cash reserves of the country.
Explanation:
Individuals deposit their money in commercial banks. The commercial banks in turn are legally bound to deposit a certain portion of these deposits with the Central Bank. Thus, the Central Bank acts as a custodian (keeper) of the cash reserves of the country.
3. Bank Rate is also called as rediscount rate.
Explanation:
Bank Rate refers to the rate at which the Central Bank lends money to the commercial bank or the rate at which the Central Bank discounts the bills of the commercial banks. This rate is also called the rediscount rate.
4. Central bank is the apex body of the monetary and banking systems of the nation's economy.
Explanation:
The Central Bank is the apex institution of a country's economy. It regulates and controls the activities of all the commercial banks and other financial institutions in the country. It plays a pivotal role in the organisation and development of a sound monetary and financial system in an economy.
5. The Reserve Bank of India was established in 1935.
Explanation:
The Reserve Bank of India, which is the central bank of India, is the apex institution of a country's monetary system. It was set up in 1935. The main objective of setting up this institution was to regulate and control the activities of the commercial banks and other financial institutions in the country.
