DEFENCE Economy CT 11: Monetary Tools and Policies

Welcome to your DEFENCE Economy CT 11: Monetary Tools and Policies

Question No. 1

The government deficit can be reduced by ________ taxes or _______ expenditure.

A. increasing; increasing

B. increasing; decreasing

C. decreasing; increasing

D. maintaining; increasing

None

Question No. 2

Which of the following correctly define the term 'Cash Reserve Ratio'?

A. Percentage of liquid reserves in the bank.

B. Percentage of deposits which a bank must keep as cash reserves with the Reserve Bank of India.

C. Liabilities of the bank which need to be paid for.

D. Ratio of deposits for the expenses of the firms.

None

Question No. 3

The measures adopted under monetary policy to overcome recession and unemployment are:

A. Raising Cash Fund Ratio

B. Reducing Statutory Liquidity Ratio

C. Reducing Cash Fund Ratio

D. Both (b) and (c)

None

Question No. 4

Which of the following statement is correct?

I. The MSF rate and reverse repo rate determine the corridor for daily movement in the weighted average call money rate.

II. Open market operation involves both a free buy/sell of government securities, insert and absorb durable liquidity respectively.

A. Neither I nor II

B. Only I

C. Both I and II

D. Only II

None

Question No. 5

Which of the following is quantitative credit control measure?

A. Bank rate

B. Open market operations

C. Minimum lending rates

D. Reserve ratio

None

Question No. 6

Which of the following is correctly related to the Statutory Liquidity Ratio (SLR)?

A. It is the minimum percentage of deposits that a commercial bank must keep in cash form only.

B. It is mentioned in Reserve Bank of India act 1934.

C. It is mentioned only in the Banking Regulation Act of 1949.

D. It is the minimum percentage of deposits that a commercial bank must keep with RBI.

None

Question No. 7

Which of the following statements is correct regarding the term 'Liquidity Trap'?

A. It is a situation when money gets held in the banking system due to technical issues.

B. In this situation the interest rate gets increases manifold.

C. Open Market Operation helps in overcoming this situation.

D. It is a situation when expansionary monetary policy does not increase the interest rate.

None

Question No. 8

Consider the following statements regarding 'Operation Twist' of RBI:

1. It is the simultaneous purchase and sale of government securities under Open Market Operations.

2. It involves selling long-end debt while buying short-tenor bonds.

3. The purpose of Operation Twist is to reduce the interest rate of long-term government bonds.

Which of the above statements is/are correct?

A. 1 and 2 only

B. 2 and 3 only

C. 1 and 3 only

D. 1, 2 and 3

None

Question No. 9

With reference to Skewflation, which of the following statement best describes skewflation?

A. It refers that there is meagre rise of inflation in the economy due to slow economic growth.

B. It is a measure of inflation by excluding commodities whose prices are more volatile.

C. It is a situation in which the price level of a few goods increases at a faster rate compared to others.

D. It is inflation caused by the changes in monetary policy.

None

Question No. 10

The total liability of the monetary authority of the country, Reserve Bank of India, is called the _______

A. Aggregate monetary resources

B. Money multiplier

C. Broad money

D. High powered money

None

DEFENCE Economy CT 11: Monetary Tools and Policies

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