MCQ Ques

Multiple Choice Questions
Q:1 Whenever the central bank offers securities in the open market, the credit creation
capability of the banking industry is expected to
1.
A. Fall
B. Rise
C. No effect
D. May rise or may fall
Q:2 What distinguishes a bank from other financial institutions?

1.
A. Accepting time deposits as a courtesy

B. Accepting demand deposits
C. Lending
D. Accepting loans and borrowings
Q:3 Given CRR = 4% and SLR = 16%, the value of the money multiplier is:
1.
A. 5
B. 25
C. 8.33
D. 6.25
Q:4 On which things were not included in the Supply of money measure?
1.
A. inter-bank deposits
B. Demand deposits with financial institutions on a net basis
C. Currency and coins are available to the general population
D. Deposits with the Reserve Bank of India (RBI) in addition to the above
Q:5 The term “Money Supply” relates to:

1.
A. Overall money held by the general public over a specified period of time
B. The total volume of money held by the public at a particular point in time
C. The total amount of money that the government possesses.
D. Both a) and b)
Q:6 The amount of money in India is controlled by?

1.
A. Planning Commission
B. Commercial Banks
C. Government of India
D. Reserve Bank of India
Q:7 If indeed the deposits made by banks are ₹ 10,000 crore and legitimate reserve
requirements are 40 percent, then the amount of initial deposits will be
1.
A. ₹ 4000 crore
B. ₹ 14000 crore
C. ₹ 3000 crore
D. ₹ 2000 crore
Q:8 To help the country’s credit situation, the RBI may:

1.
A. Repo Rates Should Be Reduced

B. Purchase stocks and bonds in the open market.
C. Reduce the cash reserve to debt ratio.
D. Sell securities in the open market
Q:9 Which of the following isn’t really a central bank’s responsibility:

1.
A. Banking facilities for the public

B. Providing credit to commercial banks
C. Providing financial assistance to the government
D. Banking facilities for government
Q:10 Which bank is in charge of India’s banking and monetary system?

1.
A. State Bank of India

B. Axis Bank
C. World Bank
D. Reserve bank of India
Q:11 What is the value of the money multiplier when initial deposits are ₹500 crores and LRR
is 10%.
1.
A. 0.2
B. 0.1
C. 10
D. 20
Q:12 What happens when margin requirements are increased.

1.
A. There has been no change in the amount of money in circulation.

B. more likely to borrow more money resulting in a rise in the money supply
C. It decreases borrowing capacity and money supply
D. None of the following
Q:13 Identify the institution that accepts deposits, makes loans, and makes investments with
the intent of profiting.
1.
A. Neither
B. Central Bank
C. Both 1 and 2
D. commercial Bank
Q:14 Commercial banks create money in the following ways:
1.
A. Issuing currency
B. Creation of bank deposits
C. Neither (1) nor (2)
D. Both (1) and (2)
Q:15 The central bank’s reduction of the CRR has the following effect on the commercial
banks’ capacity to create credit:
1.
A. Positive
B. No effect
C. Negative
D. Can be negative or can be positive
Q:16 By lowering the central bank’s margin requirements, borrowers’ borrowing capacity
increases:
1.
A. Falls
B. No effect
C. Rises
D. May rise or may fall
Q:17 Which of the statements below is true?

1.
A. M3 is the most liquid money supply measure

B. M2 is the most liquid money supply measure
C. M1 is the most liquid money supply measure
D. All of the statements are true
Q:18 Which of the following is not true?

1.
A. term deposits aren’t legal currency

B. wheat is not legal tender
C. Demand deposits are not legal tender
D. issued currency notes are not legal tender
Q:19 Which one of the below is not a central bank function?

1.
A. Lending to commercial banks

B. Banking facilities for public
C. Financial services to the government
D. Lending to government
Q:20 What happens when margin requirements are increased.
1.
A. It decreases borrowing capacity and money supply

B. It increases borrowing capacity and money supply
C. It encourages people to borrow more, resulting in a rise in the money supply.
D. There is no change in the money supply
Q:21 Which of the following is the closest to the money?

A. Securities
B. Bonds
C. Insurance policy
D. All of these
Q:22 The central bank can boost the availability of credit in a number of ways, including:
1.
A. Selling government securities

B. Buying government securities
C. Raising reverse repo rate
D. Raising repo rate

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Multiple Choice Questions

Q:2 What distinguishes a bank from other financial institutions?

A. Accepting time deposits as a courtesy

Q:5 The term “Money Supply” relates to:

Q:6 The amount of money in India is controlled by?

Q:8 To help the country’s credit situation, the RBI may:

A. Repo Rates Should Be Reduced

Q:9 Which of the following isn’t really a central bank’s responsibility:

A. Banking facilities for the public

Q:10 Which bank is in charge of India’s banking and monetary system?

A. State Bank of India

Q:12 What happens when margin requirements are increased.

A. There has been no change in the amount of money in circulation.

Q:17 Which of the statements below is true?

A. M3 is the most liquid money supply measure

Q:18 Which of the following is not true?

A. term deposits aren’t legal currency

Q:19 Which one of the below is not a central bank function?

A. Lending to commercial banks

A. It decreases borrowing capacity and money supply

Q:21 Which of the following is the closest to the money?

A. Selling government securities

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