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Ans – (a) Explanation:- Repo Rate is the rate at which the central bank of a country lends money to commercial banks to meet their short-term needs. Additional Information:- The repo rate is also called the Repurchase rate. The repo…

Ans – (c) Explanation:- If LRR = 20% Money Multiplier = 1/LRR Money Multiplier = 1/20% Money Multiplier = 100/20 Money Multiplier = 5 times

Ans – (a) Explanation:- Cash Reserve Ratio (CRR): It refers to the minimum percentage of net demand and time liabilities, to be kept by commercial banks with the central bank. A change in CRR affects the ability of commercial banks…

Ans – (c) Explanation:- The Reserve Bank of India (RBI) is empowered to regulate the money supply in the economy through its ‘Monetary Policy’. It is the policy adopted by the Central Bank of an economy in the direction of…

Ans – (d) The process of credit creation comes to an end when the cash reserves of the commercial bank become equal to the initial deposits. Explanation:- Let us now understand the process of Money Creation through an example: Suppose,…

Ans – (c) Explanation:- We have seen that new deposits in banks lead to the creation of more deposits by banks. Total deposits created are many times the initial deposits. The multiple by which deposits can increase due to an…

Ans – (c) Explanation:- One of the tools of monetary policy is the ‘Open Market Operations’ The central bank is authorized to sell the government securities to the public. When it buys the government securities from the public, against money.…

Ans – (d) Explanation:- Credit creation is determined by initial deposits and LRR (Legal Reserve Ratio) The legal Reserve Ratio consists of two components: 1. Cash Reserve Ratio (CRR) 2. Statutory Liquidity Ratio (SLR) For example Initial Deposits = ₹…

Ans – (b) Explanation:- Margin requirements is a qualitative method as it does not regulate the total volume of credit. It is specific in nature as it affects the flow of credit for a particular use. Thus qualitative methods of…

Ans – (b) Explanation:- Repo Rate:- The repo rate is the rate at which the central bank of a country (RBI in the case of India) lends money to commercial banks to meet their short-term needs. The central bank advances…