Money and Banking online Test

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Money and Banking online Test - 40

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Weekly Quiz Competition

Question 1
1 / -0

The one rupee note and coins are issued by _____________.

A
RBI (Central Bank)

B
Commercial Bank

C
Ministry of Finance

D
Central Government

Solution

Reserve bank of India has the sole right to issue currency notes of various denominations except one rupee note under Section 22 of Reserve bank of India Act. The one rupee note and coins are issued by the ministry of finance and it bears the signature of finance Secretary.
Question 2
1 / -0

Which of the following functions is not performed by the Central Bank?

A
Banker to the government

B
Overdraft Facility

C
Controller of money supply

D
Banker's Bank

Solution

Overdraft facility is the function of commercial banks, which is similar to cash credit. Overdraft facility is an agreement with a bank of an account holder where the account holder can withdraw a specified amount over and above the credit balance in his/her account for a short period of time. The interest rate rate on overdraft is higher than that of a loan.
Question 3
1 / -0

Demand deposits include __________________.

A
Saving account deposits and fixed deposits

B
Saving account deposits and current account deposits

C
Current account deposits and fixed deposits

D
All types of deposits

Solution

Demand deposit refers to the deposit wherein the amount which you have deposited with the bank can be withdrawn by you any time. It includes saving account deposit and currency account deposit in which currency account is mainly meant for businessmen, and saving account is meant for the general public.
Question 4
1 / -0

Which of the following is not an instrument of monetary policy?

A
Open market operation

B
Bank rate

C
Selective credit control

D
Government spending

Solution

Government spending is a fiscal policy tool because it has the power to raise or lower real GDP. By adjusting government spending, the government can influence economic output.
Question 5
1 / -0

______ refer to those deposits in which amount is deposited with bank for a fixed period of time.

A
Current Deposits

B
Time Deposits

C
Demand Deposits

D
Saving Deposits

Solution

A time deposit is an interest bearing bank account deposit that has a specified date of maturity, the funds in these accounts must be held for a fixed term and include the understanding that the depositor can withdrawal only by giving notice.
Question 6
1 / -0

What is the value of money multiplier when initial deposits are $$Rs. 500$$ crores and LRR is $$10%$$?

A
$$0.1$$

B
$$0.2$$

C
$$10$$

D
$$20$$

Solution

$$MONEY\space MULTIPLIER = \dfrac{1}{LRR}$$
$$MONEY\space MULTIPLIER = \dfrac{1}{10} = 0.1$$
Question 7
1 / -0

Increase in cash reserve ratio will lead to __________________.

A
Fall in Aggregate Demand

B
Rise in Aggregate Demand

C
No change in Aggregate Demand

D
None of these

Solution

Cash reserve ratio refers to the proportion of total deposits of the commercial banks which they must keep as cash reserves with the RBI. Increase in cash reserve ratio lowers the value of credit multiplier. As a result, because of reduction in credit creation capacity of the commercial banks, the aggregate demand also falls in an economy.
Question 8
1 / -0

During excess demand, central bank _____ the margin.

A
decreases

B
increases

C
removes

D
does not change

Solution

Margin requirement refers to the difference between the current value of security offered for loan and the value of loan granted. During excess demand or inflation, the central bank increases the margin in order to reduce the credit creation capacity of the commercial bank and as a result, the money supply in an economy gets reduced and the excess demand is combated.
Question 9
1 / -0

The amount saved under transaction motive depends on the level of ____________.

A
savings

B
income

C
interest

D
rent

Solution

Transaction motive basically relates to the desire of the public to let the cash move freely in the economy through depositing it into the banks and initiating the process of credit creation in the economy. Transaction motive even relates to the motive of not influencing the price changes in the capital market. Therefore, the amount of money saved under transaction motive depends upon the level of income in the economy.
Question 10
1 / -0

The algebraic relationship between multiplier and MPC is ________________.

A
Multiplier (k) = 1 + MPC

B
Multiplier (k) = 1 - MPC

C
Multiplier $$(k) =\frac{1} {1-MPC}$$

D
Multiplier $$(k) = \frac{1}{MPC}$$

Solution

Investment multiplier refers to the number of time by which the increase in output or income exceeds the increase in investment. It is measured as the ratio between change in income and change in investment and it is denoted as 'k'.
Marginal Propensity to consume refers to the percentage change in consumption for every one rupee of change in the income. It is the ratio between the change in income and corresponding change in consumption.

Multiplier(k) => Change in income / change in investment = 1/ {1-MPC(c)} where c is the marginal propensity to consume.

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Re-Attempt Weekly Quiz Competition

Money and Banking online Test - 40

Result

Money and Banking online Test - 40

Score

-

Rank

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SHARING IS CARING

Question 1

RBI (Central Bank)

Commercial Bank

Ministry of Finance

Central Government

Solution

Question 2

Banker to the government

Overdraft Facility

Controller of money supply

Banker's Bank

Solution

Question 3

Saving account deposits and fixed deposits

Saving account deposits and current account deposits

Current account deposits and fixed deposits

All types of deposits

Solution

Question 4

Open market operation

Bank rate

Selective credit control

Government spending

Solution

Question 5

Current Deposits

Time Deposits

Demand Deposits

Saving Deposits

Solution

Question 6

$$0.1$$

$$0.2$$

$$10$$

$$20$$

Solution

Question 7

Fall in Aggregate Demand

Rise in Aggregate Demand

No change in Aggregate Demand

None of these

Solution

Question 8

decreases

increases

removes

does not change

Solution

Question 9

savings

income

interest

rent

Solution

Question 10

Multiplier (k) = 1 + MPC

Multiplier (k) = 1 - MPC

Multiplier $$(k) =\frac{1} {1-MPC}$$

Multiplier $$(k) = \frac{1}{MPC}$$

Solution

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