Dear Readers,
1-What is the primary tool for controlling inflation and influencing lending rates in the economy?
a) Bank Rate
b) Repo Rate
c) Reverse Repo Rate
d) Discount Rate
e) Prime Rate
Correct Answer: b
2-Which rate is used for long-term lending to commercial banks by the central bank?
a) Bank Rate
b) Repo Rate
c) Reverse Repo Rate
d) Base Rate
e) LIBOR
Correct Answer: a
3-What is the primary purpose of the Reverse Repo Rate?
a) To control inflation
b) To encourage borrowing
c) To manage excess liquidity
d) To stabilize exchange rates
e) To regulate credit card interest rates
Correct Answer: c
4-Which rate is typically higher than the Repo Rate and is used to absorb excess liquidity from the banking system?
a) Bank Rate
b) Repo Rate
c) Reverse Repo Rate
d) Federal Funds Rate
e) Mortgage Rate
Correct Answer: c
5-If a central bank wants to encourage banks to lend more to consumers and businesses, which rate might it decrease?
a) Bank Rate
b) Repo Rate
c) Reverse Repo Rate
d) Prime Lending Rate
e) Savings Account Rate
Correct Answer: b
6-Which rate is used to influence the interest rates in the financial market and regulate credit growth?
a) Bank Rate
b) Repo Rate
c) Reverse Repo Rate
d) T-bill Rate
e) LIBOR
Correct Answer: a
7-What is the relationship between the Repo Rate and inflation?
a) An increase in Repo Rate reduces inflation.
b) An increase in Repo Rate increases inflation.
c) Repo Rate has no impact on inflation.
d) Repo Rate is inversely related to inflation.
e) Repo Rate and inflation have a direct relationship.
Correct Answer: a
8-How does a decrease in the Bank Rate affect the cost of borrowing for banks?
a) It reduces the cost of borrowing for banks.
b) It increases the cost of borrowing for banks.
c) It has no impact on the cost of borrowing for banks.
d) It depends on market conditions.
e) It increases the cost of borrowing for consumers, not banks.
Correct Answer: a
9-What is the primary goal of a central bank when it adjusts the Reverse Repo Rate?
a) Encourage savings
b) Control Inflation
c) Manage excess liquidity
d) Stimulate economic growth
e) Promote international trade
Correct Answer: c
10-If the Reverse Repo Rate is raised significantly, what are banks more likely to do with their surplus funds?
a) Lend them out
b) Invest in long-term assets
c) Deposit with the central bank
d) Purchase foreign currency
e) Increase dividend payouts
Correct Answer: c
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MAHENDRA GURU