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False, Both repo rate and reverse repo rate are fixed by the Central Bank. Explanation:- Repo Rate and Reverse Repo Rate are the two tools of monetary policy. It is the policy adopted by the Central Bank of an economy…
True, A fall in margin requirements enhances the borrowing capacity of the public, which raises the money supply in the economy. Explanation:- Margin Requirements: Margin is the difference between the amount of the loan and the market value of the…
False, RBI acts as the banker to the central government as well as state governments. Explanation:- Banker to the Government: The Reserve Bank of India acts as a banker, agent, and financial advisor to the Central Government and all the…
False, Through the function of money creation, commercial banks are able to offer loans (or create credit), which are in far excess of deposits received Explanation:- Loans offered are for more excess than the initial deposits. It depends on the…
True, Money Multiplier is inversely related to LRR as Money Multiplier = 1/LRR Additional Information:- Money multiplier is the number by which total deposits can increase due to a given change in deposits. It is inversely related to the legal…
True, Money Multiplier is inversely related to LRR as Money Multiplier = 1/LRR Additional Information:- Money multiplier is the number by which total deposits can increase due to a given change in deposits. It is inversely related to the legal…
False, They are fixed by Central Bank. Explanation:- Cash Reserve ratio and statutory liquidity ratio are the components of Legal Reserve Ratio. These are quantitative tools of monetary policy of central bank to control the money supply and credit creation.
True, The purchase of securities decreases the reserves of commercial banks, which reduces their credit-creating power. Explanation:- When commercial banks purchase securities from the public, The public withdraws their money from the deposits. It decreases the cash reserves with the…
False, A financial institution can be a banking institution only when it performs the functions of accepting deposits and advancing loans. Additional Information:- The main function of commercial banks is to accept deposits and advance loans. A financial institution can…
False, Commercial banks contribute to quantum of money supply in the economy through credit creation. Additional Information:- However, commercial banks do not issue notes and currency, yet they contribute to the money supply. It is done through credit creation. The…