Tag: instruments of monetary policy and the reserve bank of india

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Questions Related to instruments of monetary policy and the reserve bank of india

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

Foreign currency reserves of the country are held by ______.

  1. SBI

  2. CBI

  3. UTI

  4. RBI
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Reserve Bank of India(RBI) is the central bank in India as it is an apex bank that regulates and controls the entire banking system of a country. The Reserve Bank of India(RBI) maintains a minimum reserve of international currency all the time in order to meet emergency requirements of foreign exchange and overcome adverse requirements of deficit in balance of payments. Therefore, foreign currency reserves of the country are held by RBI. 

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

Open market operations (OMOs) are related to _________.

  1. Fiscal policy

  2. Monetary policy

  3. Labour policy

  4. Agricultural policy
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Open market operation (OMO) is related to the monetary policy by the central bank in which the bank deals in the sale and purchase of securities and bonds in the open market to control the supply of money in the economy. By selling the securities and bonds, the central bank soaks liquidity from the economy which controls the inflation in the economy by decreasing the purchasing power of the people and by buying the securities and bonds, the central bank releases liquidity which controls deflation in the economy by increasing the purchasing power of the people.

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

A foreign corporation may open its project office ___________.

  1. without permission from the Reserve Bank of India

  2. with permission from the Reserve Bank of India

  3. only for research work

  4. both b and c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The Reserve bank of India is the central bank of the country that regulates the function of all the bank. It issue notes, carry out various agency services, general services etc. It also regulates the working of all the banks as well as foreign exchange. Hence, a foreign corporation may open its project office with the permission from Reserve Bank of India.

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

When the RBI makes open market operations by sale of securities the money supply in the banking system?

  1. Reduces

  2. Increases

  3. Is not affected at all

  4. Difficult to say anything
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Open market operation (OMO) is a monetary policy by the central bank in which the bank deals in the sale and purchase of securities in the open market to control the supply of money in the economy. By selling the securities, the central bank soaks liquidity from the economy which reduces the money supply in the economy. 

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

Which of the following measure is/are adopted for monetary policy in India?

  1. Quantitative Measures

  2. Qualitative Measures

  3. Both (A) and (B)

  4. Neither (A) nor (B)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Monetary policy measures are broadly classified into quantitative measures (like CRR, SLR, Repo) and qualitative measures (like credit rationing, moral suasion).

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

________ is the official minimum rate at which the Central Bank of a country is prepared to rediscount approved bill held by Commercial Banks.

  1. Repo rate

  2. Reverse repo rate

  3. Discount rate

  4. Bank rate
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Bank Rate is the official minimum rate at which the central bank is prepared to rediscount or buy bills of exchange or other commercial paper eligible for purchase under the Act.

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

Sale of Government Securities by RBI constitutes _________ of controlling Inflation.

  1. Monetary Measures

  2. Fiscal Measures

  3. Controlling Investments Method

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

Open Market Operations, such as the sale of government securities by the RBI, are a key tool of monetary policy used to manage liquidity and control inflation.