Money and Banking online Test

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Money and Banking online Test - 26

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Weekly Quiz Competition

Question 1
1 / -0

SLR stands for ________.

A
Short Liquid Rupee

B
Statutory Liquidity Ratio

C
Statutory Liquid Rupee

D
Satutory Long Run

Solution

SLR which stands for Statutory Liquidity Ratio refers to liquid assets i.e. cash that the commercial banks must hold with themselves on daily basis as a portion of their total deposits.
SLR is determined by the central bank and is a legal requirement to be fulfilled by the commercial banks.
Question 2
1 / -0

Which of these is also called broad money?

A
$$M1$$.

B
$$M2$$.

C
$$M3$$.

D
$$M4$$.

Solution

Money supply refers to the total stock of money of all types ( currency as well as demand deposits) held by the people of a country at a given point of time.

Money supply is measured in several ways which includes M1, M2, M3 and M4 measurement of money supply. Every measurement has it own definition with different components varying from most liquid to most rigid form.
M3 measurement of money supply is a broader concept of money supply compared to M1. Besides all the components of M1, it includes net time deposits (or fixed deposits or term deposits) of the people with the commercial banks. Therefore, M3 is also called broad money.
Question 3
1 / -0

In order to curb inflationary conditions, the Central Bank may ________.

A
increase CRR

B
increase SLR

C
issue bonds

D
all the three

Solution

In other to curb inflation, the central bank of a county may adopt the following measures:
(i) Increase in CCR: Cash Reserves Ratio (CRR) refers to the proportion of total deposits of the commercial banks which they must keep as reserves with the central bank in the form of cash. By increasing the cash reserve ratio, the commercial banks has to maintain more cash with the central bank which reduces their credit creation capacity and therefore money supply in the economy also reduces which corrects the situation of inflation.
(ii) Increase in SLR: Statutory Liquidity Ratio (SLR) refers to liquid assets i.e. cash which the commercial banks must hold with themselves on a daily basis as a portion of their total deposits. By increasing the statutory liquidity ratio, the commercial banks has to maintain more cash with themselves which reduces their credit creation capacity and therefore money supply in the economy also reduces which corrects the situation of inflation.

(iii) Issuing bonds in open market: Open market operation (OMO) is a monetary policy by the central bank in which the bank deals in the sale and purchase of securities and bonds in the open market to control the supply of money in the economy. By issuing the securities and bonds, the central bank soaks liquidity from the economy that reduces the purchasing power in the economy which controls the situation of inflation.
Question 4
1 / -0

Which of these is/are not a determinant of a cost function?

A
size of plant

B
level of taxes

C
no. of consumers

D
capacity utilization
Question 5
1 / -0

Money market mutual funds ________.

A
enable individuals and small businesses to invest indirectly in money-market instruments

B
are available only to high net-worth individuals

C
are used in acquiring and placing mortgages

D
are mostly tradable on stock exchange

Solution

Money market mutual funds are used in acquiring and placing mortgages. Money market deals with short term securities having maximum tenure of 1 year. Money market mutual funds can be defined as short term liquid investments which invest in high quality money market instruments.
Question 6
1 / -0

To check the accuracy of index by shifting the base year, which test is used ________________.

A
Circular test

B
Time reversal test

C
Unit test

D
None
Question 7
1 / -0

CRR stands for ________.

A
Capital Redemption Reserve

B
Cash Reserve Ratio

C
Current Reserve Ratio

D
Currency Reserve Ratio

Solution

Cash Reserves Ratio (CRR) refers to the proportion of total deposits of the commercial banks which they mus keep as reserves with the central bank in the form of cash. Cash reserve ratio is determined by central bank so that they can control the amount of credit creation of the commercial banks at the time of inflation or deflation in the economy. By increasing the cash reserve ratio, the commercial banks has to maintain more cash with the central bank which reduces their credit creation capacity and therefore money supply in the economy also reduces which corrects the situation of inflation and by decreasing the cash reserve ratio, the commercial banks has to maintain less cash with the central bank which increases their credit creation capacity and therefore money supply in the economy also increases which corrects the situation of deflation.
Question 8
1 / -0

Cheap money policy is followed to _______.

A
counter inflation

B
to reverse depression

C
to appease the public

D
to increase disposal income of the house holds

Solution

Cheap money policy refers to a monetary policy by the central bank where the central bank sets low interest rates so that credit is easily available to the general public in order to bring efficiency in trade and commerce in an economy. Such a policy is used by the government at the time of deflation or recession in the economy in order to reverse depression from the economy as such a policy increases the purchasing power of the people by increasing the money supply in the economy.
Question 9
1 / -0

Which of the following function does money serve when used to purchase or sell different goods and services?

A
Store of value

B
Medium of exchange

C
Standard of value

D
Display of power

Solution

Money refers to a common medium of exchange that is issued under the law of government and acts as a legal tender for the whole country. As a medium of exchange, money functions as a mode of exchanging goods and services. In this function of money, money is used to purchase or sell different goods and services in the market.
Question 10
1 / -0

The rate of economic growth is _______ proportional to the rate of growth of capital formation.

A
inversely

B
directly

C
constant

D
none of the above

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Re-Attempt Weekly Quiz Competition

Money and Banking online Test - 26

Result

Money and Banking online Test - 26

Score

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Rank

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SHARING IS CARING

Question 1

Short Liquid Rupee

Statutory Liquidity Ratio

Statutory Liquid Rupee

Satutory Long Run

Solution

Question 2

$$M1$$.

$$M2$$.

$$M3$$.

$$M4$$.

Solution

Question 3

increase CRR

increase SLR

issue bonds

all the three

Solution

Question 4

size of plant

level of taxes

no. of consumers

capacity utilization

Question 5

enable individuals and small businesses to invest indirectly in money-market instruments

are available only to high net-worth individuals

are used in acquiring and placing mortgages

are mostly tradable on stock exchange

Solution

Question 6

Circular test

Time reversal test

Unit test

None

Question 7

Capital Redemption Reserve

Cash Reserve Ratio

Current Reserve Ratio

Currency Reserve Ratio

Solution

Question 8

counter inflation

to reverse depression

to appease the public

to increase disposal income of the house holds

Solution

Question 9

Store of value

Medium of exchange

Standard of value

Display of power

Solution

Question 10

inversely

directly

constant

none of the above

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