Home › JAIIB › IE&IFS › Unit 14

JAIIB · Indian Economy & Indian Financial System · Module B — Economic Concepts Related to Banking

JAIIB IE&IFS Unit 14 — Money Supply and Inflation: Free MCQs with Explanations

By Swarnakshi Jha (ex-banker) · Updated 2 November 2026 · Paper 1 of the November 2026 cycle (1 November 2026)

This page is a free slice of our JAIIB IE&IFS question bank for Unit 14 — Money Supply and Inflation (Module B — Economic Concepts Related to Banking). The Mock Centre holds 73 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five of those questions to try, and the traps that cost marks.

IE&IFS · Module B73 MCQs in the Mock Centre5 free belowPaper on 1 November 2026

Key facts examiners test from this unit

  1. Money's four functions: exchange medium, value measure, value store, deferred-payment standard (NOT 'source of production').
  2. Aggregates: M1 = currency with public + demand deposits + RBI 'other'; M2 = M1 + PO savings; M3 = M1 + time deposits; M4 = M3 + all PO deposits (ex-NSC); M0 = circulation + bankers' + other RBI deposits; liquidity M1>M2>M3>M4; RBI publishes fortnightly.
  3. Currency with public = circulation − bank cash; demand deposits paid on demand (current/ savings) vs time deposits (not on demand, less liquid).
Law update, November 2026. The textbook gives 2012 (the old series); the new CPI series, base 2024 = 100, began with January 2026 data released on 12 February 2026. Current base years: CPI 2024 (from February 2026), WPI 2022-23 (from June 2026), GDP 2022-23 (from February 2026).

5 free practice questions — tap an option

Five basic questions from this unit. Answers lock on the first tap, exactly as in the exam, and a short explanation opens underneath. The Mock Centre adds the moderate and tough questions, why every other option is wrong, the concept capsule and the exam tip — with your score and revision dates tracked.

Question 1 of 5
MONEY SUPPLY refers to:
Why (c): MONEY SUPPLY refers to MONEY IN CIRCULATION — currency plus deposits, sliced into the M measures.
Question 2 of 5
INFLATION is defined as:
Why (b): INFLATION is a SUSTAINED, GENERAL price rise — across the whole basket and persisting over time, not a one-off jump.
Question 3 of 5
An overdue fixed deposit balance counts within:
Why (b): Overdue FDs are payable on demand and sit in demand liabilities (alongside current accounts, SB's demand portion, margins).
Question 4 of 5
The GDP deflator differs from CPI/WPI in that it:
Why (a): The GDP deflator is the broadest price measure — the implicit price index of everything in GDP — but it comes only quarterly or annually, which limits its use for policy.
Question 5 of 5
'Other deposits with RBI' (a small M1 component) include:
Why (b): 'Other deposits with the RBI' are balances of non-bank, non-central-government holders — foreign central banks, international bodies and quasi-government institutions; tiny, but part of M1.
0 of 5 answered.

Traps in this unit

Confusable AConfusable BThe difference
M1M3Narrow vs broad (time deposits)
M2M4+PO savings vs +all PO deposits
Practise all 73 questions on Unit 14. The free demo opens a slice of every subject with the same explanations; the IE&IFS Online-only pass unlocks all 3,000+ IE&IFS questions, the full and module mocks, Smart Revision and the Readiness Score for 18 months (₹1,299). Not sure where you stand? Sit the free 120-question mock first (all four papers, questions drawn from pages like this one, real exam screen).
Take the free mock Open the free demo

← Unit 13: Supply and Demand · Unit 15: Theories of Interest → · All IE&IFS units · JAIIB 2026 guide

Related reading

Independent study aid — not affiliated with, endorsed by, or sponsored by the Indian Institute of Banking & Finance (IIBF). Exam pattern, dates, fees and passing criteria are set by IIBF — always confirm the current rules at iibf.org.in. Regulatory figures verified as of November 2026; verify from official sources before relying on them in practice.