Banking – Test 4 Welcome to your Banking - Test 4 Q1. To reduce the money supply in the economy, the central bank will: a) Lower the repo rate b) Raise the CRR c) Buy government securities in the open market d) Lower the margin requirements Q2. According to a news item, "From 1st April 2020, Punjab National Bank (PNB), Oriental Bank of Commerce (OBC) and United Bank of India (UBI) will combine to form the nation's second-largest lender". Which function of the central bank is highlighted in the given news item? Q3. What is true about a central bank? a) Central bank deals with the general public b) Central bank creates credit c) Central bank regulates credit d) Central bank aims at profit making Q4. Central bank, being the sole currency issuing authority in the country, it is also known as_____________________ Q5. The instruments of monetary policy that aim at controlling the quantum/volume of credit in the economy are known as ___________________ Q6. CRR and SLR are the two ___________________ of LRR? a) Types b) Components Q7. By buying and selling of Govt. securities in the open market, the central bank performs which of the following functions? a) Banker to the Govt. b) Agent to the Govt. c) Advisor to the Govt. d) None of the above Q8. "Managed floating is often referred to as dirty floating, as the Govt. of a country practicing managed floating tries to manipulate the foreign exchange rate for its own benefit". To which function of the central bank can the given situation be referred to? a) Clearing-house function b) Lender of last resort c) Custodian of cash reserves d) Custodian of foreign exchange reserves Q9. What is the nature of relationship that exists between LRR and credit creation? Q10. The deposits that banks are able to create on the basis of primary deposits, through the process of credit creation is known as: Q11. Who is the current RBI Governor? Q12. The rate at which the central bank lends to the commercial banks for long-term purpose is known as ____________________ Q13. If the LRR is 40%, and the initial cash deposits with the banks are Rs.5000, what would be the value of total lending by the commercial banks? a) Rs. 10,000 b) Rs. 12,500 c) Rs. 7500 d) Rs. 5000 Q14. "Commercial banks create credit on the advice of the Govt." Is the statement true or false? a) True b) False Q15. Which instrument of monetary policy ensures that the commercial banks are selective in lending during inflation, and liberal in lending during deflation? Time's up
