Q. What does the Cash Reserve Ratio (CRR) refer to?
-
A.
The percentage of total deposits that banks must hold as reserves with the RBI
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B.
The interest rate at which banks borrow from the RBI
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C.
The amount of money banks can lend to customers
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D.
The total capital banks must maintain
Solution
CRR is the percentage of total deposits that banks must hold as reserves with the RBI.
Correct Answer:
A
— The percentage of total deposits that banks must hold as reserves with the RBI
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Q. What is the effect of increasing the repo rate by the RBI?
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A.
Increases liquidity in the market
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B.
Decreases the cost of borrowing
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C.
Reduces inflationary pressures
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D.
Encourages banks to lend more
Solution
Increasing the repo rate makes borrowing more expensive, which helps to reduce inflationary pressures.
Correct Answer:
C
— Reduces inflationary pressures
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Q. What is the primary tool used by the RBI to control inflation?
-
A.
Adjusting the Cash Reserve Ratio
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B.
Changing the Statutory Liquidity Ratio
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C.
Modifying the repo rate
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D.
Issuing new currency
Solution
The primary tool used by the RBI to control inflation is modifying the repo rate.
Correct Answer:
C
— Modifying the repo rate
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Q. What is the purpose of Open Market Operations (OMO)?
-
A.
To control the money supply in the economy
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B.
To regulate foreign exchange rates
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C.
To set interest rates for loans
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D.
To manage government expenditure
Solution
OMO is conducted to control the money supply in the economy by buying or selling government securities.
Correct Answer:
A
— To control the money supply in the economy
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Q. Which of the following is a direct consequence of a decrease in the SLR?
-
A.
Increased liquidity for banks
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B.
Higher interest rates for loans
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C.
Decreased money supply in the economy
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D.
Lower inflation rates
Solution
A decrease in the SLR increases liquidity for banks, allowing them to lend more.
Correct Answer:
A
— Increased liquidity for banks
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Q. Which of the following is a function of the RBI?
-
A.
Issuing currency notes
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B.
Setting income tax rates
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C.
Regulating the stock market
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D.
Managing government budgets
Solution
One of the key functions of the RBI is to issue currency notes.
Correct Answer:
A
— Issuing currency notes
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Q. Which of the following is NOT a tool of monetary policy used by the RBI?
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A.
Cash Reserve Ratio (CRR)
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B.
Statutory Liquidity Ratio (SLR)
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C.
Open Market Operations (OMO)
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D.
Income Tax Rate
Solution
Income Tax Rate is a fiscal policy tool, not a monetary policy tool used by the RBI.
Correct Answer:
D
— Income Tax Rate
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