UGC NET Economics Unit 7 PYQs, Important Questions with Answers

UGC NET Economics Unit 7 focuses on Money and Banking, which is one of the most important sections for the exam. This topic covers key concepts like monetary policy, inflation control, money supply, banking systems, and financial institutions in India. Previous Year Questions (PYQs) from this unit help students understand the exam pattern and frequently asked concepts. By practicing these questions, candidates can strengthen their understanding of topics such as RBI policies, financial markets, and banking models, which are often tested in the exam.

UGC NET Economics Unit 7 PYQs

Below are the UGC NET Economics Unit 7 PYQs (Money and Banking), designed to help students practice important exam-level questions and understand key concepts frequently asked in previous years.

Q1. Money supply M1 includes:
A. Currency + demand deposits + RBI deposits
B. Currency + time deposits
C. Only currency
D. Savings deposits
Answer: A

Q2. RBI acts as “lender of last resort” to:
A. Households
B. Government
C. Commercial banks in crisis
D. Foreign investors
Answer: C

Q3. RBI’s inflation targeting framework is:
A. 2% ± 2%
B. 4% ± 2%
C. 5% ± 1%
D. 6% ± 2%
Answer: B

Q4. Which is a quantitative credit control tool?
A. Moral suasion
B. Margin requirement
C. Credit rationing
D. Advertising control
Answer: B

Q5. Repo rate is used by RBI to:
A. Increase tax revenue
B. Control money supply
C. Print currency
D. Fix wages
Answer: B

Q6. Treasury Bills are:
A. Equity instruments
B. Long-term bonds
C. Short-term government securities
D. Corporate shares
Answer: C 

Q7. Fixed exchange rate overvaluation leads to:
A. Excess supply of foreign currency
B. Excess demand for foreign currency
C. No change in demand
D. Increase in exports automatically
Answer: B

Q8. Under overvaluation, central bank:
A. Buys foreign currency
B. Sells foreign currency
C. Increases imports
D. Decreases exports
Answer: B

Q9. Diamond–Dybvig model is related to:
A. Inflation
B. Banking crises
C. Foreign trade
D. Fiscal deficit
Answer: B 

Q10. M3 includes:
A. Currency only
B. M1 + time deposits
C. Only demand deposits
D. Gold reserves
Answer: B

Q11. Cash Reserve Ratio (CRR) increase leads to:
A. More lending
B. Less lending
C. No change
D. Increase in exports
Answer: B

Q12. Selling government securities by RBI causes:
A. Increase in money supply
B. Decrease in money supply
C. No change
D. Increase in inflation always
Answer: B

Q13. Bank rate increase leads to:
A. Cheaper loans
B. Expensive borrowing
C. More credit creation
D. No effect
Answer: B

Q14. Which is NOT included in M1?
A. Currency
B. Demand deposits
C. Time deposits
D. RBI deposits
Answer: C

Q15. Moral suasion means:
A. Legal punishment to banks
B. RBI persuasion to banks
C. Tax collection
D. Currency printing
Answer: B

Benefits of Practicing UGC NET Economics Unit 7 PYQs

These PYQs are very important for exam preparation as they help students understand the exam pattern and improve their conceptual clarity in Money and Banking topics.

• Provides a clear idea of frequently asked and important topics from previous years.

• Improves conceptual understanding of core topics like money supply, banking system, and monetary policy.

• Strengthens knowledge of RBI functions and credit control tools.

• Helps in mastering key concepts like M1, M2, M3, M4 definitions and components.

• Enhances understanding of the inflation targeting framework in India.

• Builds clarity on monetary policy instruments (CRR, SLR, Repo Rate, Bank Rate).

• Improves understanding of financial markets and banking institutions in India.

• Helps in identifying high-weightage and repeated exam topics.

• Increases speed and accuracy in solving MCQs under exam conditions.

• Provides real exam-level practice and boosts confidence.

• Helps in better revision and retention of concepts before exams.

• Strengthens application-based understanding through previous year question patterns.

• Reduces exam stress by familiarizing with difficulty level and framing style of questions.