Money and Banking online Test

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Money and Banking online Test - 29

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Weekly Quiz Competition

Question 1
1 / -0

CRR is the ______________.

A
Rate of interest changed by commercial bank from business browsers

B
Amount of reserved the commercial banks are required to keep with Central bank

C
Rate of interest banks pays to the depositor

D
None of the above

Solution

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. It is a quantitative measure of credit control and is determined by the central bank of the country.
Question 2
1 / -0

Central Bank acts as a custodian of the cash preserves of commercial banks which means it ______________.

A
acts as a lender of last resort

B
as clearing agent

C
maintains the cash reserves of the commercial banks

D
none of the above

Solution

Central bank is an apex regulatory institution that controls the entire banking system of a country. The central bank act as a custodian of the cash reserves of the commercial bank as the commercial banks have to maintain a proportion of their total deposits as reserves in the form of cash with the central bank as a part of legal requirement.
Question 3
1 / -0

Out of the following which assets is most liquid?

A
shares of stock

B
government securities

C
land

D
currency

Solution

Liquid asset refers to the assets which are either in the form of cash or can easily be converted in to cash. Since currency of any country is already in the form of cash. Therefore, currency is considered the most liquid asset among all the assets in the economy.
Question 4
1 / -0

A government bond is being matured after five years in comparison to Rs 50000 that is lying with Ram. Which is more liquid?

A
Government bond

B
Rs 50000

C
Both are equally liquid

D
None of the above

Solution

Liquid asset refers to the assets which are either in the form of cash or can easily be converted in to cash. A government bond which gets mature after five years will take five years time to be converted in to cash when compared to Rs. 50,000 which is there with Ram in the form of cash. Therefore, Rs. 50,000 is more liquid than the government bond which gets mature after five years.
Question 5
1 / -0

Four Functions money as per functional approach are

A
Medince

B
Measure

C
Saving

D
Both a & b
Question 6
1 / -0

When the liquidity trap occurs the demand for money ________________.

A
becomes perfectly interest elastic

B
becomes perfectly interest inelastic

C
means that an increase in money supply leads fall in the interest rate

D
means that an increase in the money supply to an increase in the interest rate

Solution

A liquidity trap is an economic situation where people hoard financial capital instead of investing or consuming it as the interest rates are low and savings rates are high which renders the monetary policy ineffective. So, people believe that the interest rates will soon rise which might decrease the prices of the bonds. Therefore, the demand for money depends on the rate of interest in the economy which hence makes the demand for money perfectly interest elastic.
Question 7
1 / -0

SLR is the _________.

A
amount of Reserve the commercial bank is required to keep with central bank

B
percentage of total customers deposit that commercial bank one required to keep with themselves

C
percentage of total deposit that commercial bank is themselves

D
total cash & gold that a bank has

Solution

Statutory Liquidity Ratio or SLR is a minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold or other securities. These are not reserved with the Reserve Bank of India (RBI), but with banks themselves. The SLR is fixed by the RBI.
Question 8
1 / -0

For Banks, Central Bank acts as a _________.

A
Clearing agent

B
Borrower

C
Lender

D
All the above

Solution

A central bank is an apex bank that controls the entire banking system of a country. Central bank acts as a clearing agent, borrower and lender to all the commercial banks as they help the commercial banks by discounting or clearing their bills against a small charge, borrow money from the commercial banks that the time of urgency and lend money to all the banks at the time of liquidity crunch against some collateral.
Question 9
1 / -0

Liquidity is related ______ to price fluctuation.

A
Inversely

B
Directly

C
Equally

D
None of the above
Question 10
1 / -0

Liquidity of an asset is _____ related with the average time taken to convert it into cash in the market.

A
Directly

B
Inversely

C
Equally

D
Proportionately

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Re-Attempt Weekly Quiz Competition

Money and Banking online Test - 29

Result

Money and Banking online Test - 29

Score

-

Rank

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SHARING IS CARING

Question 1

Rate of interest changed by commercial bank from business browsers

Amount of reserved the commercial banks are required to keep with Central bank

Rate of interest banks pays to the depositor

None of the above

Solution

Question 2

acts as a lender of last resort

as clearing agent

maintains the cash reserves of the commercial banks

none of the above

Solution

Question 3

shares of stock

government securities

land

currency

Solution

Question 4

Government bond

Rs 50000

Both are equally liquid

None of the above

Solution

Question 5

Medince

Measure

Saving

Both a & b

Question 6

becomes perfectly interest elastic

becomes perfectly interest inelastic

means that an increase in money supply leads fall in the interest rate

means that an increase in the money supply to an increase in the interest rate

Solution

Question 7

amount of Reserve the commercial bank is required to keep with central bank

percentage of total customers deposit that commercial bank one required to keep with themselves

percentage of total deposit that commercial bank is themselves

total cash & gold that a bank has

Solution

Question 8

Clearing agent

Borrower

Lender

All the above

Solution

Question 9

Inversely

Directly

Equally

None of the above

Question 10

Directly

Inversely

Equally

Proportionately

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