TEST: Economy : Monetary Policy

Name: _________________________________________ Roll No. ____________________ Date:_______________

1. Which of the following are the qualitative tools of 6. The decrease in Reverse Repo Rate will:
monetary policy? 1. Increase the supply of money in financial market.
1. Liquidity Adjustment Facility 2. Lead to rise in inflation.
2. Marginal Standing Facility Which of the above statements is/are correct?
3. Direct action (a) 1 only
4. Rationing of credit (b) 2 only
Select the correct answer using the code given below. (c) Both 1 and 2
(a) 1 and 4 only (d) Neither 1 nor 2
(b) 3 and 4 only
(c) 1 and 3 only 7. Which of the following statements is/are correct related
(d) 1, 3 and 4 only to the concept of Marginal Standing Facility?
1. It is the rate at which RBI lends to its clients
2. Increase in Bank Rate will: generally against government securities.
1. Increase the cost of borrowings by banks 2. It can use government securities of Statutory
2. Decline the supply of Money liquidity ratio (SLR) as collateral.
3. Reflect the tightening of RBI's Monetary Policy Select the correct answer using the code given below:
(contractionary MP) (a) 1 only
Select the incorrect statement: (b) 2 only
(a) 1 and 3 only (c) Both 1 and 2
(b) 2 and 3 only (d) Neither 1 nor 2
(c) 1, 2 and 3
(d) None of the above 8. Which of the following statements is/are correct related
to Broad Money (M3) in India?
3. Which of the following statements regarding the 1. Central banks track the growth of Broad Money to
Monetary Policy Committee (MPC) is/are correct? help forecast inflation.
1. It is a six-member body having members from the 2. Broad Money includes deposits in savings
RBI and the government in equal proportion. account.
2. It decides on benchmark monetary policy interest Select be correct answer using the code given below:
rates to contain inflation. (a) 1 only
Select the correct answer using the code given below: (b) 2 only
(a) 1 only (c) Both 1 and 2
(b) 2 only (d) Neither 1 nor 2
(c) Both 1 and 2
(d) Neither 1 nor 2 9. According to the Monetary Policy in India, arrange the
following policy rates in increasing order:
4. Consider the following statement with respect to 1. Repo Rate
Monetary policy committee (MPC) 2. Reverse Repo Rate
1. MPC was setup on the recommendation of 3. Marginal Standing Facility rate (MSF rate)
Raghuram committee. Select the correct answer using the code given below:
2. MPC decides the range of inflation targeting on an (a) 1 < 2 < 3
annual basis. (b) 2 < 3 < 1
Select the incorrect statement: (c) 2 < 1 < 3
(a) 1 only (d) 1 < 3 < 2
(b) 2 only
(c) Both 1 and 2 10. The Reserve Bank of India calculates four components
(d) Neither 1 nor 2 of money supply, M1, M2, M3, and M4. Select the
incorrect pair out of the following:
5. Which of the following is/are the functions of the (a) M1 = includes currency and coins with the public
Reserve Bank of India (RBI)? and demand deposits of the banks
1. RBI is responsible for fiscal policy of the (b) M2 = includes M1 and demand deposits of the
Government of India. post offices
2. RBI is the banker to the Government of India. (c) M3 = includes the sum of M1 and M2
3. RBI decides the interest rate of monetary policy (d) M4=includes the sum ofM3 and demands as well
Select the correct answer using the code given below: as time deposits of post offices
(a) 1 only
(b) 2 and 3 only
(c) 2 only
(d) 3 only

(a) (b) (c) (d) (a) (b) (c) (d) (a) (b) (c) (d)
1. 5. 9. Marks:

2. 6. 10.
Signature:
3. 7. 11.

4. 8. 12.