MONETARY POLICY TECHNIQUES OF RBI
/in Mock Test /by NoushadTest-summary
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MCQs
Read questions thoroughly and trace out the right answer from the options given below.
Each question carries 1 marks
Total time allotted 20 minutes
After the exam look review and read and learn the right answer with explanation
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- Question 1 of 10
1. Question
1 pointsThis is the rate at which RBI borrows money from commercial banks:
CorrectD: Reverse repo is the rate offered by the central bank to banks for parking funds with it. This instrument was started in November 1996 as part of LAF by the RBI.
Incorrect - Question 2 of 10
2. Question
1 pointsWhich of the following instruments of Monetary Policy does not involve the use of government securities?
CorrectCRR is the percentage of cash deposits that banks need to keep with the RBI on a fortnightly basis. Commercial banks can invest in the government securities for meeting SLR requirements. Government securities are actively involved in the operations of OMOs and repo. Visibly, short-term volatile liquidity should be addressed through Repo auctions, medium-term liquidity management through OMOs and long-term liquidity management through CRR.
Incorrect - Question 3 of 10
3. Question
1 pointsThe lowering of bank rate by the RBI leads to:
CorrectBank rate is the rate of interest charged by the central banks while providing financial accommodation to commercial banks. It has direct impact on the long-term lending activities.
Incorrect - Question 4 of 10
4. Question
1 pointsConsider the following statements on open market operations:
1. Under inflation, central bank intervenes with the open market and sells government securities in the open market.
2. During deflation or crisis RBI purchases government securities.
Select the correct statements:CorrectInflation – RBI sells govt. securities and mops up excess liquidity. Deflation – RBI purchases govt. securities and injecting liquidity into the system.
Incorrect - Question 5 of 10
5. Question
1 pointsConsider the following statements on cash reserve ratio (CRR):
1. During the period of boom, RBI cuts CRR
2. During the period of crisis, RBI hikes CRR
Select the correct statements:CorrectBoth the statements are wrong. During the period of boom, RBI hikes CRR and during the period of crisis, RBI cuts CRR and revive the economic activities.
Incorrect - Question 6 of 10
6. Question
1 pointsIn the context of Indian economy, ‘Open Market Operations’ refers to:
CorrectOMOs refers to the sale and purchase of government securities and other credit instruments in the open market by the central bank.
Incorrect - Question 7 of 10
7. Question
1 pointsBuying of government securities by RBI is a part of:
CorrectBuying of government securities by RBI is a part of ‘quantitative easing policy’ or ‘soft money policy’ and adopted during the crisis period.
Incorrect - Question 8 of 10
8. Question
1 pointsThe cheap and dear money policy relate to changes in:
CorrectThe cheap money policy indicates cut in the bank rate during crisis period and dear money policy is a part of hike in the bank rate during inflationary period.
Incorrect - Question 9 of 10
9. Question
1 pointsThe rate which Scheduled Commercial Banks have been allowed to borrow overnight at their discretion, up to 3% of their respective net demand & time liabilities (NDTL) at penal rate of interest is called:
CorrectMarginal Standing Facility, Commenced from 09/5/2011 and now MSF = Bank Rate.
Incorrect - Question 10 of 10
10. Question
1 pointsWhen the Reserve Bank of India reduces the Statutory Liquidity Ratio by 50 basis points, which of the following is likely to happen?
CorrectCut in SLR rate enhances the liquidity to the banking system and cut the lending rate.
Incorrect
