Read Instructions for the test.

1. Negative marks are -0.33 per wrong answer
2. Right answer is 1 mark
3. No time limit but finish in 30 mins
4. Solution can be found at below chapters:

Test series is based on following chapters.

1. Indian Economy Chapter 8: BANKING CONCEPTS
2. Indian Economy Chapter 9: CONCEPT OF BUDGETING

Q1: proportion of total deposits banks keep in reserves.

Reserve deposit ratio

Cash reserve ratio

Currency deposit ratio

none

Q2: fraction of the deposits banks must keep with RBI

Cash reserve ratio

Statutory liquidity ratio

Currency deposit ratio

all

Q3: fraction of the total demand and time deposits banks must keep in liquid assets.

Statutory liquidity ratio

Cash reserve ratio

Reserve deposit ratio

all

Q4: total liability of the monetary authority of the country is

High powered money or monetary base

reserved money

M0

all

Q5: ratio of stock of money to the high powered money

Money multiplier

M3 / M0

both

none

Q6: RBI acts as

banker to banks

lender of the last resort

extends loans to banks to ensure solvency of the latter

all

Q7:deficit financing from central bank borrowing is

When governments can’t meet their expense with their income, they print currency to meet the budget deficit

it involves selling of bonds to the RBI which issues currency to the government in return

money then ultimately comes in the hands of the public and becomes a part of money supply

all

Q8: Open market operations involves

RBI purchases or sells government securities to the general public

RBI raising interest rates

RBI issuing licences to banks to open operations

all

Q9: Which is true ?

Marginal propensity to save is the proportion of the total additional income of the economy people wish to save as a whole

Marginal propensity to consume is the fraction of the total additional income people wish to consume.

both

none

Q10:It the people of the economy increase the total proportion of income they save then the total value of savings in the economy will either decrease or remain same - is principle of

communism

socialism

capitalism

paradox of thrift

Q11:a country that trades with other nations in goods and services and also in financial assets is an ___ economy

open

closed

mixed

all

Q12: degree of openness of an economy is the ratio of

total foreign trade [exports+ imports] to the country’s GDP

total domestic to total foreign trade

both

none

Q13: long term loan from RBI. No collateral needed is called

repo rate

reverse repo rate

cash reserve ratio

bank rate

Q14:commercial banks can borrow from RBI at this rate [Repo+1]% and can use SLR securities as collateral ?

repo

investment > reverse repo

marginal standing facility

cash reserve ratio

Q15: all clients can borrow from RBI for short period at this rate but can’t use SLR securities as collateral.

repo

reverse repo

marginal standing facility

none

Q16: RBI pays this to its clients for short term loans.

repo

reverse repo

both

recurring deposits

Q17: banks have to keep this much in gold, securities, cash etc. It is decided by RBI.

demand deposits

time deposits

Statutory liquidity ratio

Cash reserve ratio

Q18: banks have to deposit this much cash with RBI but no interest earned.

net time and demand liabilities

nominal exchange deposits

Cash reserve ratio

marginal standing facility

Q19: Which is true ?

To reduce inflation: tight monetary policy, reduce money supply

To fight deflation: increase money supply, easy monetary policy.

both

none

Q20: Quantitative Monetary policy instruments with the RBI are

Reserve ratio: CRR, SLR

Open market operations [OMO]

reverse repo, repo, marginal standing facility, bank rate

all

Q21: Which is true ?

Rationing – ceiling of loans to specific sectors

Moral suasion

Direct action

all

Q22: Which is true ?

Qualitative instruments are selective and direct

Quantitative instruments are general and indirect.

both

none

Q23: During high inflation RBI

increases CRR, SLR and the liquidity adjustment facility rates

sells government securities through open market operations

reduce money supply

all

Q24: During deflation RBI

decreases CRR, SLR

buys G-Secs from public via OMO

both

none

Q25: monetary policy committee is setup with

RBI governor [chairman]

deputy governor [vice chairman]

executive director and 2 outsiders.

all

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