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Table of Contents
MONETARY POLICY FOR COMPETITIVE EXAMS
1.What is the defect of the barter system?
(A) Lack of double coincidence of wants
(B) Difficulty in the measurement of value
(C) Difficulty in store of value
(D) All of these
answer:- d
2. Which of the following is the credit money?
(A) Cheque and draft
(B) Promissory note
(C) Exchange note
(D) All of these
answer:- d
3.Which among the following is the near money?
(A) Bonds
(B) Insurance policy
(C) Securities
(D) All of these
answer:- d
4.Which of the following is the feature of money?
(A) General acceptability
(B) Homogeneous unit
(C) Liquid asset
(D) All of these
answer:- d
5.In order to encourage investment in the economy, the Central Bank may ________
(A) Reduce Cash Reserve Ratio
(B) Increase Cash Reserve Ratio
(C) Sell Government securities in the open market
(D) Increase Bank Rate
answer:- a
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6.Institution that accepts deposits for lending purpose is known as __________
(A) Commercial Bank
(B) Central Bank
(C) Government
(D) Public
answer:- a
7.Which of the following is the function of a commercial bank?
(A) Accepting deposits
(B) Credit creation
(C) Agency function
(D) All of these
answer:- d
8.The central bank can increase the availability of credit by:
(A) Raising repo rate
(B) Raising reverse repo rate
(C) Buying government securities
(D) Selling government securities
answer:- c
9.Giving permission to withdraw money by an amount more than deposited to is known as _________
(A) Advance
(B) Overdraft
(C) Loan
(D) None of these
answer:- b
10.What are the alternative measures of money supply in India?
(A) M1
(B) M2
(C) M3 and M4
(D) All of these
answer:- d
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11.Who circulates all mint and one rupee not in India?
(A) Ministry of Finance
(B) RBI
(C) Ministry of External Affairs
(D) State Government
answer:- a
12.When was the minimum reserve system started in India?
(A) 1947
(B) 1948
(C) 1951
(D) 1957
answer:- d
13.Which is the most liquid measure of the money supply?
(A) M4
(B) M3
(C) M2
(D) M1
answer:- d
14.Indian Monetary System is based on ________
(A) Paper Standard
(B) Metallic Standard
(C) Gold Standard
(D) Credit Money Standard
answer:- a
15.Which of the following is the apex bank of India?
(A) RBI
(B) SBI
(C) SBP
(D) PNB
answer:- a
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16.Who has the right of note issue?
(A) Central Bank
(B) Commercial Bank
(C) Government
(D) Co-operative Bank
answer:- a
17.Which of these is NOT a monetary policy tool?
a) Discount Rate
b) Open Market Operations
c) Balance Accounts
d) Reserve Requirements
answer:- c
18.The goals of monetary policy do NOT include the promotion of _________________
a) Maximum employment
b) Low Taxes
c) Stable Prices
d) Moderate long-term interest rates
answer:- b
19.Inflation is a sustained increase in the general level of __________.
a) Accounts
b) Income
c) Prices
d) Profit
answer:- c
20.Bank rate is the rate at which the Reserve Bank of India provides loans to
a) Public sector undertakings
b) Commercial banks
c) Private corporate sector
d) Non-banking financial institutions
answer:- b
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21.When the supply for money increases and the demand for money reduces, there will be
a) A fall in the level of prices
b) A decrease in the rate of interest
c) An increase in the rate of interest
d) A fall in the level of demand
answer:- a
22.If the interest rate decreases in an economy, it will
a) Decrease the investment expenditure in the economy
b) Increase the loan repayment by the government
c) Increase the consumption expenditure in the economy
d) Increase the total savings in the economy
answer:- c
23.The cost of bank credit is determined on the basis of base rate and all bank loans are given at a rate equal to or higher than the base rate. Of the following, who determines this base rate?
a) It is fixed by the Reserve Bank of India
b) It is determined by the Ministry of Finance
c) It is determined by market forces of supply and demand for credit.
d) It is determined by the bank concerned
answer:- a
24.When the Reserve Bank of India announces an increase in the cash reserve ratio, what does it mean?
a) The commercial banks will have less money to lend.
b) The union government will have less money to lend.
c) The union government will have more money to lend.
d) The commercial banks will have more money to lend.
answer:- a
25.Which of the following guidelines by the RBI does not hamper the profitability of commercial banks in India?
a) Cash reserve ratio
b) Statutory liquidity ratio
c) Margin requirements
d) Bank rate
answer:- c
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26.Which agency has the foremost role in regulation of banking sector in India?
a) Reserve Bank of India
b) Union Finance Commission
c) Union Ministry of Finance
d) Union Ministry of Commerce
answer:- a
27.The banks are required to maintain a certain ratio between their liquid assets and total deposits. This ratio is called
a) CRR (cash reserve ratio)
b) SLR (statutory liquidity ratio)
c) CAR (capital adequacy ratio)
d) CLR (central liquid reserve)
answer:- b
28.To finance its deficit, the government prefers borrowing from the public over the RBI. What can be the best reason for this?
a) Rate of interest charged by the RBI is higher.
b) The government has to return the sum to the RBI within a fixed period of time
c) Public borrowing does not affect the money supply in the market
d) It increases the sale of government bonds.
answer:- c
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29.What is “monetary base”?
a) The cash issued under the authority of the central bank
b) The money whose real value exceeds its nominal value
c) The currency with public and deposits maintained by the commercial banks with the Reserve Bank of India
d) None of the above
answer:- c
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