Economics · Banking Financial Awareness

Macroeconomics and Policy

2,878 Questions

Macroeconomics and policy questions assess the understanding of broad economic indicators, government fiscal strategies, and banking regulations. Topics include inflation causes, currency exchange rates, monetary policy tools, and historical economic systems. These are highly tested in banking and civil services examinations.

Inflation FactorsMonetary PolicyExchange RatesFiscal PolicyEconomic IndicatorsBretton Woods System

Macroeconomics and Policy Questions

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

An increase in the Bank rate generally indicates that the ________________.

  1. market rate of interest is likely to fall

  2. Central Bank is no longer making loans to commercial banks

  3. Central Bank is following an easy money policy

  4. Central Bank is following a tight money policy
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Bank rate is the interest rate of the RBI for long-term lending to its clients. Higher 'bank rate' indicates the RBI signalling for a tighter money policy.

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

Which of the following is not a cure for inflation?

  1. Better capacity utilization

  2. Lowering of bank rate

  3. Public distribution system

  4. Reducing bedget deficit
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When banks want to borrow long term funds from RBI, bank rate is the interest rate which RBI charges to them. Increase in the bank rate will be useful to control inflation.

It is currently set to 6.75 % (Second Bi-monthly Monetary Policy Statement, 2018–19). The bank rate is not used to control money supply these days.

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

In order to control credit and investment, the Central Bank of a country should _____________.

  1. Sell securities in the open market and hike the Cash Reserve Ratio.

  2. Buy securities from the open market and lower the Cash Reserve Ratio.

  3. Buy securities from the open market and hike the Cash Reserve Ratio.

  4. Sell securities in the open market and lower the Cash Reserve Ratio.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

To control credit and investment, the Central Bank needs to reduce liquidity. Selling securities drains cash from the system, and hiking the Cash Reserve Ratio (CRR) forces banks to hold more idle reserves, thereby restricting lending capacity.

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

Cheap money policy is followed __________.

  1. to counter inflation

  2. to reverse depression

  3. to appease the public

  4. to increase disposal income of the households
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Cheap money policy refers to a monetary policy by the central bank where the central bank sets low interest rates so that credit is easily available to the general public in order to bring efficiency in trade and commerce in an economy. Such a policy is used by the government at the time of depression in the economy as it increases the money supply in the economy which reverses depression. 

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

Dear money policy means ___________.

  1. giving loan and advances to trade and industry at higher interest rate.

  2. paying less for the same quantity of goods and services

  3. printing high denomination currency

  4. printing money by costly technology
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Dear money policy refers to a monetary policy by the central bank where the central bank sets high interest rates so that credit is not easily available to the general public in order to decrease the real income and hence purchasing power of the people. Such a policy is used by the government at the time of inflation in the economy. 

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

Cheap money policy means __________.

  1. making money available to trade and industry at cheaper interest rate.

  2. giving money at discounted price

  3. demanding more money for the same goods than earlier.

  4. printing money by cost efficient printing technology
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Cheap money policy refers to a monetary policy by the central bank where the central bank sets low interest rates so that credit is easily available to the general public in order to bring efficiency in trade and commerce in an economy. Such a policy is used by the government at the time of deflation or recession in the economy. 

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

Dear money policy is followed  _________.

  1. to counter inflation

  2. to reverse depression

  3. to appease the public

  4. to increase disposal income of the houeholds
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Dear money policy refers to a monetary policy by the central bank where the central bank sets high interest rates so that credit is not easily available to the general public in order to decrease the real income and hence purchasing power of the people. Such a policy is used by the government at the time of inflation in the economy as it decreases the money supply in the economy which combats inflation. 

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

Which of the following policies forms a part of the Monetary Policy?

  1. International Trade Policy

  2. Exchange Rate Policy

  3. Prices and Incomes Policy

  4. Export-Import Policy
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Monetary policy involves managing the money supply and interest rates. Exchange rate policy is a key component of this, as it influences the value of the currency and inflation.

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

Raising or lowering of the central bank credit rate is known as __________.

  1. open market operation

  2. cash reserve ratio

  3. bank rate policy

  4. none of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The Bank Rate is the rate at which the central bank lends money to commercial banks. Adjusting this rate is a fundamental tool of monetary policy known as bank rate policy.

Multiple choice economics environment and sustainable development need for sustainable development environmental economics sustainable development

Which of the following is not the reason for the shift in supply and demand of energy away from its economic equilibrium?

  1. Tax hikes

  2. Nationalisation of energy companies

  3. Regulation of the energy sector

  4. None of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Tax hikes, nationalization, and regulation are all government interventions that can shift supply or demand curves away from a free-market equilibrium. Therefore, none of these options represent a reason that is NOT a cause for such a shift.

Multiple choice history industrial sector growth of banks in india nationalisation and privatisation of banks private sector anddifference between public and private sector

Which of the following was a cause for nationalization of Commercial Banks?

  1. Concentration of economic power

  2. Neglect of Priority Sectors

  3. Urban bias

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The decision to nationalize banks was based on several issues, including the concentration of wealth in a few hands, the urban bias of banking services, and the neglect of priority sectors like agriculture.

Multiple choice history industrial sector growth of banks in india nationalisation and privatisation of banks private sector anddifference between public and private sector

The recent global financial turmoil has adverse impact on the Indian financial markets, particularly the equity market and the foreign sector, however, Indian banks have not been significantly impacted by these developments. Which one among the following is the main reason behind this?

  1. Comfortable capital adequacy ratio, asset quality, profitability indicators and lower non-performing assets.

  2. Fiscal stimulation package by the Central Government for some select industries.

  3. Strong foreign exchange reserves of the Reserve Bank of India.

  4. More credit by the banks to the housing and real estate sector.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Indian Banks have strong balance sheets, are well capitalised and well regulated. The capital adequacy ratio of every Indian bank is well above the basel norms and those stipulated by the RBI. Not a single Indian bank has had to be rescued in the aftermath of the crisis. India has a long history of working with Public Sector Banks.

Multiple choice history industrial sector growth of banks in india nationalisation and privatisation of banks private sector anddifference between public and private sector

The effect of increase in CRR will be reduced or nullified if _________.

  1. bank rate is reduced

  2. securities are sold in the open market

  3. SLR is increased

  4. people do not borrow from non-banking institutions
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The effect of increased CRR will be reduced or nullified if bank rate is reduced because both are inverse functions. If CRR will increase it contracts credit and if bank rate reduced it expands credit.