This quiz works best with JavaScript enabled. Home > Finance > Economics > Monetary Economics > Monetary Economics – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Monetary Economics Quiz 1 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. In institution that accepts deposits and makes loans is defined as A) A bank. B) Gambling. C) Insurance. D) A loan shark. Show Answer Correct Answer: A) A bank. 2. What is essential to effective monetary policy? A) Timing. B) Healthy tax program. C) Spending cuts. D) Political will. Show Answer Correct Answer: A) Timing. 3. M1 and M2 are known as ..... A) Broad money. B) Narrow money. C) Saving deposits. D) None of above. Show Answer Correct Answer: B) Narrow money. 4. The interest that the Fed charges banks to borrow money. A) The Discount Rate. B) The Subprime Rate. C) The Reserve Requirement. D) The Counterbalance Ratio. Show Answer Correct Answer: A) The Discount Rate. 5. What means the government has spent more than it has raised A) Surplus. B) Revenue. C) Deficit. D) Appropriations. Show Answer Correct Answer: C) Deficit. 6. For transacting at an ATM, the customer inserts (swipe) his card in the ATM andenters his A) Account number. B) Aadhaar Number. C) Personal Identification Number. D) Mobile Number. Show Answer Correct Answer: C) Personal Identification Number. 7. The Keynesian money demand function can be expressed as A) Md = y + r/L. B) Md = L(y, r). C) Md = L/(y, r). D) Md = L/(y + r). Show Answer Correct Answer: B) Md = L(y, r). 8. Credit card is an example of A) Plastic money. B) Paper currency. C) Currency. D) Money. Show Answer Correct Answer: A) Plastic money. 9. Which of the following is not an instrument of selective credit control? A) Margin requirements. B) Open market operation. C) Credit rationing. D) None of the above. Show Answer Correct Answer: B) Open market operation. 10. Which of the following is a qualitative method of credit control of a central bank? A) Bank rate. B) Open market operation. C) Rationing of Credit. D) All of the above. Show Answer Correct Answer: C) Rationing of Credit. 11. The assets of the banks which do not perform are called A) Non-Performing Assets (NPA). B) Bad loans. C) Fixed loans. D) A and b. Show Answer Correct Answer: D) A and b. 12. The Federal Reserve will lower the reserve requirement, lower the discount rate, and purchase government securities when: A) The economy needs to be slowed down. B) The economy needs to be stimulated. C) They want to impact a Presidential elections. D) They are getting ready to issue currency. Show Answer Correct Answer: B) The economy needs to be stimulated. 13. What is NOT a characteristic of money? A) Acceptable. B) Portable. C) Accessible. D) Divisible. Show Answer Correct Answer: C) Accessible. 14. What is a Reserve Requirement? A) The interest set by the Fed when they loan out $ to member banks. B) The amount of $ banks must have in their vaults. C) The buying and selling of government bonds (securities). D) When the Fed uses their tools to stabilize currency, they are engaging in this. Show Answer Correct Answer: B) The amount of $ banks must have in their vaults. 15. In India, currency notes are issued by the A) World Bank. B) SBI. C) State Bank. D) Reserve Bank of India. Show Answer Correct Answer: D) Reserve Bank of India. 16. Which of these is the correct definition of monetary policy: A) A policy that controls taxes. B) A policy that aims to achieve economic growth. C) A policy that aims to control the supply of money in the economy. D) A policy that aims to contribute to the supply of money. Show Answer Correct Answer: C) A policy that aims to control the supply of money in the economy. 17. Which is the largest private sector bank in India on the basis of consolidated assets? A) Axis Bank. B) HDFC Bank. C) South Indian Bank. D) ICICI Bank. Show Answer Correct Answer: D) ICICI Bank. 18. If the reserve ratio is 4 percent, then the money multiplier is A) 20. B) 2. C) 25. D) 4. Show Answer Correct Answer: C) 25. 19. The RBI headquarters is located at A) Chennai. B) Bengalaru. C) Mumbai. D) Delhi. Show Answer Correct Answer: C) Mumbai. 20. Which of the following is not a function of the RBI? A) Banker to the public. B) Note issue. C) Bankers' bank. D) Custodian of foreign exchange. Show Answer Correct Answer: A) Banker to the public. 21. Low interest rates often cause ..... A) An increase in inflation. B) Less employment. C) More unemployment. D) A decrease in inflation. Show Answer Correct Answer: A) An increase in inflation. 22. The latest types of money A) Mental money. B) Gold money. C) Plastic money. D) All the above. Show Answer Correct Answer: C) Plastic money. 23. Money that has value because the Government declared that it is money. A) Currency. B) Commodity Money. C) Coins. D) Fiat Money. Show Answer Correct Answer: D) Fiat Money. 24. Money supply means the total amount of money in A) State. B) World. C) Country. D) Economy. Show Answer Correct Answer: D) Economy. 25. The fundamental function of a commercial bank is A) Advancing loans. B) Creating credit. C) Issuing bank draft. D) Acceptance of deposits. Show Answer Correct Answer: A) Advancing loans. 26. Which of the following is a qualitative or selective method of credit control by the central bank? A) Bank rate or Discount Rate Policy. B) Open market operations. C) Cash Reserve Ratio. D) None of the above. Show Answer Correct Answer: D) None of the above. 27. The Fed's decision to raise or lower the ..... impacts interest rates in banks across the nation, mortgage rates, loan rates, etc. A) Money multiplier. B) Required reserve ratio. C) Discount rate. D) Currency exchange rate. Show Answer Correct Answer: C) Discount rate. 28. During an expansion, what you do to prevent inflation? A) Lower the RR, lower the % i, buy SBI. B) Raise the RR, raise the % i, sell SBI. Show Answer Correct Answer: B) Raise the RR, raise the % i, sell SBI. 29. Something that must be accepted as payment for a debt is called A) Counterfeit. B) Bootleg. C) Legal Tender. D) None of above. Show Answer Correct Answer: C) Legal Tender. 30. Deflation means..... A) Prices are falling. B) Prices are rising. C) Value of money is increasing. D) Price are remaining the same. Show Answer Correct Answer: A) Prices are falling. Next →Related QuizzesEconomics QuizzesFinance QuizzesMonetary Economics Quiz 2Monetary Economics Quiz 3 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books