Economics Test

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Economics Test - 21

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Weekly Quiz Competition

Question 1
5 / -1

The main aim of monetary policy is ______

A
to bring price stability in the economy.

B
employment generation in the country.

C
to increase trade surplus.

D
to generate greater tax revenue.

Solution

The main aim of monetary policy of the country is to bring price stability in the country.
Question 2
5 / -1

M¹= Currency will Public + ______ + Other Deposits with RBI

A
Time deposits with post offices

B
Demand deposits with commercial banks

C
Time deposits with commercial banks

D
Demand deposits with post offices

Solution

M₁ is the most liquid form of money measure which is comprised of CC+ DD + OD
Question 3
5 / -1

Value of Money Multiplier ______ with an increase in Cash Reserve Ratio.

A
Increase

B
Decrease

C
Remain unchanged

D
None of these

Solution

Value of money multiplier and CRR are inversely proportional
Question 4
5 / -1

Which of the following is not a part of M1?

A
Time deposit

B
Demand deposit

C
Both(a)and(b)

D
Neither(a) nor (b)

Solution

Time deposits are less liquid in nature, so they are not a part of M , measure of money supply.
Question 5
5 / -1

Choose the incorrect pair from given below.

Choose from the options given below.

A
A - (i)

B
B - (ii)

C
C - (iii)

D
All of the above pairs are incorrect

Solution

Central bank uses different measures of money supply which are arranged based upon the liquidity. M₁ is the most liquid among all, so known as Narrow Money and M₃is less liquid and the monetary base.
Question 6
5 / -1

If LRR is equal to 25%, what will be the value of credit multiplier?

A
4

B
5

C
6

D
Can't be determined

Solution

Money or credit multiplier = 1/LRR So, 1/0.25 = 4
Question 7
5 / -1

Money multiplier is equal to

A
1/CRR

B
1/SLR

C
1/LRR

D
None of these

Solution

Money multiplier is inversely related to the Legal Reserve Ratio which is the sum total of CRR and SLR.
Question 8
5 / -1

What will be the total amount of money created in the system if legal reserves ratio is 20% and primary deposits are ₹ 1,000?

A
₹ 1,000

B
₹ 2,000

C
₹ 3,000

D
₹ 5,000

Solution

Money Created

= Primary Deposits x Money Multiplier

= 1,000 x (1/0.20)

= 1,000 x 5

= ₹ 5,000
Question 9
5 / -1

At a given point in time, money multiplier is equal to 10. What will be the value of legal reserve ratio?

A
10%

B
15%

C
20%

D
25%

Solution

Money Multiplier = (1/LRR)

10 = 1 / LRR

LRR = 1 / 10 = 0.10 or 10 %
Question 10
5 / -1

Which of the following is / are not an assumption(s) of credit creation process?

(i) Entire banking system is taken as a single unit.

(ii) All transactions are done through banks.

(iii) There is no saving in the economy.

A
Only (i)

B
Only (ii)

C
Only (iii)

D
Both (i) and (ii)

Solution

There is no such assumption as of not having any savings in the economy in the process credit creation.

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Re-Attempt Weekly Quiz Competition

Economics Test - 21

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Economics Test - 21

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Question 1

to bring price stability in the economy.

employment generation in the country.

to increase trade surplus.

to generate greater tax revenue.

Solution

Question 2

Time deposits with post offices

Demand deposits with commercial banks

Time deposits with commercial banks

Demand deposits with post offices

Solution

Question 3

Increase

Decrease

Remain unchanged

None of these

Solution

Question 4

Time deposit

Demand deposit

Both(a)and(b)

Neither(a) nor (b)

Solution

Question 5

A - (i)

B - (ii)

C - (iii)

All of the above pairs are incorrect

Solution

Question 6

4

5

6

Can't be determined

Solution

Question 7

1/CRR

1/SLR

1/LRR

None of these

Solution

Question 8

₹ 1,000

₹ 2,000

₹ 3,000

₹ 5,000

Solution

Question 9

10%

15%

20%

25%

Solution

Question 10

Only (i)

Only (ii)

Only (iii)

Both (i) and (ii)

Solution

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