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Earn 100

Define Credit Multiplier. What role does it play in determining the credit creation power of the banking system? Use a numerical illustration to explain.

Important Questions on Money and Banking

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Economics>Macroeconomics>Money and Banking>Money Creation by Banking System
 In order to reduce credit in the country, RBI may:
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Economics>Macroeconomics>Money and Banking>Money Creation by Banking System
Money Multiplier = 1/ ?.
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Economics>Macroeconomics>Money and Banking>Money Creation by Banking System
_____  is exact opposite of Repo Rate.
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Economics>Macroeconomics>Money and Banking>Money Creation by Banking System
If Legal Reserve Ratio is 25%, then value of credit multiplier would be _____.
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Economics>Macroeconomics>Money and Banking>Money Creation by Banking System
Repo rate or _____ rate is the rate at which RBI lends money to commercial banks to meet their short-term needs.
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Economics>Macroeconomics>Money and Banking>Money Creation by Banking System
_____  refers to minimum percentage of net demand and time liabilities which commercial banks are required to maintain with themselves.
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Economics>Macroeconomics>Money and Banking>Money Creation by Banking System
Which of the following are most appropriate in reference to tools used by the Central bank to control money supply?
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Bank Rate is also known as _____.
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_____  instruments of monetary policy affect the volume of money supply in the economy. 
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Economics>Macroeconomics>Money and Banking>Money Creation by Banking System

Value of Money Multiplier, _____ (increases/decreases/remains unchanged) with an increase in Cash Reserve Ratio.

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Economics>Macroeconomics>Money and Banking>Money Creation by Banking System

Cash deposits with the Commercial Banks are _____ (Primary/Secondary) Deposits.

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_____ instruments of monetary policy affect the direction of money supply in the economy.
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Economics>Macroeconomics>Money and Banking>Money Creation by Banking System
Commercial Banks earn interest from lending money. So, they want to lend the maximum possible amount. However, there is a limit to credit creation by banks and this is determined by _____ which is fixed by Central Bank.
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Economics>Macroeconomics>Money and Banking>Money Creation by Banking System

Which of the following is correct in reference to Reserve Bank of India?

 

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Economics>Macroeconomics>Money and Banking>Money Creation by Banking System
_____ is the apex bank in the economy?
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Economics>Macroeconomics>Money and Banking>Money Creation by Banking System
To decrease money supply in the economy, reverse repo rate should be _____.
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Economics>Macroeconomics>Money and Banking>Money Creation by Banking System
_____ is the policy adopted by the Central Bank of an economy in the direction of credit control or money supply. 
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Economics>Macroeconomics>Money and Banking>Money Creation by Banking System
_____ refers to buying and selling of government securities by the Central Bank from/to public and commercial banks. 
 
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Economics>Macroeconomics>Money and Banking>Money Creation by Banking System
One rupee note and all coins are issued by the _____.
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Economics>Macroeconomics>Money and Banking>Money Creation by Banking System

Primary Deposits + Secondary Deposits = _____ of the Commercial Banks.