Class 12 Economics - WEST-BENGAL
Money and Banking
The chapter Money and Banking in Class 12 Economics for West Bengal (WBBSE) students explores the evolution of money, its functions, and how commercial banks and the central bank (RBI) control the money supply in an economy. Students learn about the mechanism of credit creation by commercial banks and the crucial monetary policy tools used by the Reserve Bank of India to regulate inflation and liquidity. This chapter is fundamental for understanding macroeconomic policies, carrying significant weightage in board exams through both conceptual and numerical questions.
Start Learning FreeKey Concepts
Barter System and its Drawbacks
The direct exchange of goods for goods without using money, plagued by the lack of double coincidence of wants and difficulty in measuring value.
Money and its Functions
Anything generally accepted as a medium of exchange, measure of value, store of value, and standard of deferred payments.
Money Supply
The total volume of money held by the public at a particular point of time in an economy, comprising currency with the public and net demand deposits.
Commercial Banks and Credit Creation
Financial institutions that accept deposits and grant loans, creating credit in the economy through the process of money multiplier.
Central Bank and Monetary Policy
The apex institution (RBI in India) that regulates the country's monetary system using quantitative and qualitative tools like CRR, SLR, Repo Rate, and Open Market Operations.
Important Formulas
Board Exam Info
In the West Bengal (WBBSE) Class 12 Economics board examination, this chapter typically carries around 6 to 8 marks. Questions frequently include short-answer questions (SAQs) on functions of money or central bank tools, objective MCQs, and numerical problems based on the credit creation multiplier process.
Frequently Asked Questions
What is the difference between CRR and SLR?
Cash Reserve Ratio (CRR) is the fraction of total deposits commercial banks must keep with the Central Bank, whereas Statutory Liquidity Ratio (SLR) is the percentage of liquid assets banks must maintain with themselves.
How does a Central Bank control inflation?
To control inflation, the Central Bank adopts a dear money policy by increasing repo rate, CRR, and SLR, which reduces commercial bank lending and lowers money supply in the economy.
What is meant by double coincidence of wants?
It is a situation under the barter system where two persons desire to exchange each other's goods, which is very difficult to find.
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