Ratios and OMO

Q. What are the instruments of monetary policy of RBI?

Q.

Calculate gross domestic product at factor cost and factor income to abroad:

$\begin{array}{cc}& \\ \left(1\right)\text{Compensation of employees}& 800\\ \left(2\right)\text{Profits}& 200\\ \left(3\right)\text{Dividends}& 50\\ \left(4\right)\text{GNP at MP}& 1400\\ \left(5\right)\text{Rent}& 150\\ \left(6\right)\text{Interest}& 100\\ \left(7\right)\text{Gross domestic capital formation}& 300\\ \left(8\right)\text{Net fixed capital formation}& 200\\ \left(9\right)\text{Change in stock}& 50\\ \left(10\right)\text{Factor income from abroad}& 60\\ \left(11\right)\text{NIT}& 120\end{array}$

OR

Which of the following will be included in national income?

(a) Production of services for self-consumption

(b) Vegetables grown in the kitchen garden

(c) Imputed value of owner-occupied house

(d) Stock of raw material left last year

Q.

What is the difference between MOD balance and available balance?

Q.

If RBI reduces the SLR by 50 basis points. which of the following is likely to happen?

1. Scheduled Commercial Banks may cut their lending rates

2. Liquidity in the banking system

3. GDP growth rate increases drastically

4. Foreign Institutional Investors may bring more capital to our country

Q.

If the CRR is 5%, what is the value of money multiplier?

1. 25

2. 30

3. 20

4. 0

Q.

What will happen if the RBI increases the Cash Reserve Ratio?

1. All other banks will increase its interest rate

2. The value of money multiplier increases

3. The value of money multiplier decreases

4. All other banks will decreases its interest rate

Q.

Which of the following is not a monetary tool?

1. CRR

2. Deficit financing

3. Open market operations

4. SLR

Q.

"Open Market Operations" refers to:

1. Sale and purchase of bonds and securities by the commercial banks to the customers.

2. Sale and purchase of bonds and securities to the commercial banks by the RBI.

3. Sale and purchase of bonds and securities by the RBI to the government.

4. None of the above

Q.

Which of the following is not the instrument of credit control?

1. Managed floating

2. Bank rate

3. SLR

4. CRR

Q.

Which of the following is a measure taken by RBI to control inflation in our country?

1. Increase in CRR

2. Both A and B

3. Increase in SLR

4. Neither A nor B

Q.

If CRR is increased by RBI, what will be the effect on the market?

1. Both A and B

2. None of the above

3. Banks will have to maintain more money as cash or deposits with RBI, hence will have less money to lend or invest, thus reducing the liquidity in the market

4. Banks will have to maintain more money as cash or deposits with RBI, hence will have less money to lend or invest, thus increasing the liquidity in the market.

Q.

What will be the impact on the Cash Reserves of commercial banks if RBI conducts a sale of securities?

1. Decrease

2. Remain Constant

3. Increase

4. Increase or decrease

Q.

How much interest is paid by the RBI on the money deposited under the CRR measure?

1. Equal to the rate of CRR

2. More than the CRR

3. No interest is paid by the RBI

4. Less than the CRR

Q.

When RBI does some open market operation transactions, it wishes to regulate which of the following?

1. Inflation

2. Supply of money in the economy

3. Borrowing power of the commercial banks

4. A & B

Q.

RBI lowers repo rate from 8% to 7.75%.

Analyse the economic value of this statement from the viewpoint of (i) the households, (ii) investors, and (iii) the economy.

Q.

What are the components of money supply?

Q. If the CRR is 5%, the value of money multiplier is .

1. 25
2. 30
3. 20
4. \N

Q.

How is the repo rate calculated?

Q.

Open market operations as an instrument of credit control are performed by:

1. Both A and B

2. The commercial bank of the country

3. The central bank of the country

4. None of these

Q.

How does the "purchase of government securities in the open market" affect the money supply?

Q.

If CRR (cash reserve ratio) is increased from 10% to 20%, what should be the change in credit supply, other things remaining constant? Explain.

Q.

The reserves held by commercial banks with the RBI , over and above the statutory minimum, are called

1. Cash reserves

2. Deposit reserves

3. Excess reserves

4. Momentary reserves

Q.

State the components of money supply.

Q. When RBI wants to reduce liquidity in the banking system, it increases the .

1. CRR
2. repo rate
3. SLR
4. reverse repo rate

Q.

Is it correct that when margins are raised, demand for loans is negatively impacted?

Q.

Cash Reserve Ratio increases the cash for ____.

1. All of the above

2. Lending

3. Borrowing

4. Mortgaging

Q.

Every financial institution has to maintain a certain quantity of liquid assets with themselves at any point of time of their total time and demand liabilities. These assets have to be kept in non-cash form such as precious metals, approved securities like bonds etc. The ratio of the liquid assets to time and demand liabilities is termed as _____.

1. Statutory Liquidity Ratio

2. Repo Rate

3. Reverse Repo Rate

4. Cash Reserve Ratio

Q. CRR is maintained in the form of .

1. government security
2. balance with the RBI
3. market instrument
4. gold balances

Q.

If CRR is lowered, investment demand must rise. Defend or refute the statement.

Q.

Is balanced budget always the best budget?