Banking and Monetary Quiz

If the total deposits created by commercial banks is Rs 10,000 crores and legal reserve requirements is 40%, then amount of initial deposits will be ____.

• (a) Rs 2,000 crores

• (b) Rs 3,000 crores

• (c) Rs 4,000 crores

• (d) Rs 14,000 crores

If amount of initial deposits with commercial banks is Rs 3,000 crore and LRR is 25%, then total deposits created will be:

• (a) Rs 750 crore

• (b) Rs 12,000 crore

• (c) Rs 6,000 crore

• (d) Rs 9,000 crore

What is the value of money multiplier when initial deposits are Rs 500 crores and LRR is 10%?

• (a) 0.1

• (b) 0.2

• (c) 10

• (d) 20

Bank rate is the rate at which _____ lends money to ____

• (a) Central Bank, Commercial Banks

• (b) Commercial Banks, Central Bank

• (c) Central Government, Commercial Banks

• (d) Central Bank, Central Government

Under Statutory Liquidity Ratio, commercial banks are required to keep a fraction of ____ in the form of liquid assets. (Choose the correct alternative)

• Total Demand Deposits

• Term Deposits

• Total Demand and Term Deposits

• Current Deposits

In a hypothetical economy, Mr. Neeraj has deposited Rs 100 in the bank. If it is assumed that there is no other currency circulation in the economy, then the total money supply in the economy will be _____. (Fill up the blank with correct alternative)

• (a) Zero

• (b) Rs 100

• (c) Not defined

• (d) Rs 120

Suppose in an economy, the initial deposits of Rs 400 crores lead to the creation of total deposits worth Rs 4,000 crores. Under the given situation the value of reserve requirements would be _____. (Fill up the blank with correct alternative)

• (a) 0.01

• (b) 1

• (c) 0.1

• (d) 0.4

Banks create credit:

• Out of nothing

• On the basis of their securities

• On the basis of their total assets

• On the basis of deposits

Repo rate is the rate at which:

• Commercial Banks purchase government securities from the central bank

• Commercial Banks can take loans from the central bank

• Commercial Banks can keep their deposits with the central bank

• Short-term loans are given by commercial banks

Which institution (s) performs the activity of credit creation?

• Commercial Banks

• Central Bank

• Both (a) and (b)

• Neither (a) nor (b)