Free Monetary Policy 03 Practice Test - 12th Grade - Commerce
Question 1
Which of the following does not come under quantitative methods of monetary policy?
Repo rate
Moral suasion
Cash reserve ratio
Open market operations
SOLUTION
Solution : B
Moral suasion is a qualitative method, and other options are quantitative methods of monetary policy.
Question 2
Open market operations as an instrument of credit control are performed by:
The central bank of the country
The commercial bank of the country
Both commercial banks and the central bank
None of these
SOLUTION
Solution : A
Open market operations as an instrument of credit control are performed by RBI.
Question 3
If the CRR is 5%, what is the value of money multiplier?
25
30
20
0
SOLUTION
Solution : C
Money Multiplier =1CRR
=15100=20
Question 4
Which of the following is(are) indirect instruments of Monetary Policy?
Open market operations
Cash Reserve Ratio
Statutory Liquidity Ratio
SOLUTION
Solution : D
All the given options are direct insturments of monetary policy.
Question 5
A borrower comes into the bank and pays off 10,000 Rupees of his loan. This was a cash payment by the borrower to the bank. What was the immediate effect on the nation’s money supply?
Cannot be determined
Remains constant
Increases
Decreases
SOLUTION
Solution : D
The money supply decreased by 10,000 Rupees. While the cash was in the borrower’s possession, it was part of the nation’s money supply. As a reserve in a bank, it is not included in the money supply.
Question 6
Which of the following is not a monetary tool?
CRR
SLR
Deficit financing
Open market operations
SOLUTION
Solution : C
Out of the given options, deficit financing is not a monetary tool.
Question 7
The maximum limit of SLR is
30%
35%
45%
40%
SOLUTION
Solution : D
The maximum limit of SLR is 40%.
Question 8
If the money supply were decreased, what would happen to the price level?
Increase
Decrease
Remains constant
Either A or B
SOLUTION
Solution : B
A decrease in the money supply will lead to a decrease in price levels.
Question 9
An increase in the money supply will cause the AD curve to:
shift leftward
shift rightward
remain unchanged
shift leftward without affecting the price level
SOLUTION
Solution : B
An increase in the money supply increases the aggregate demand, as people now hold more money.
Question 10
Which of the following is(are) correct?
SLR: the commercial bank keep the minimum percentage of deposits with itself
SLR: the commercial bank keep the minimum percentage of deposit with the central bank
CRR: the commercial bank keeps the minimum percentage of deposits with the central bank
CRR: the commercial bank keeps the minimum percentage of deposits with itself
SOLUTION
Solution : A and C
Statutory liquidity ratio (SLR) is the minimum percentage of deposits to be kept by the commercial bank with itself. Cash Reserve Ratio (CRR) is the minimum percentage of deposit to be kept by the commercial bank with the central bank.