Banks create money by ?

Related Mcqs:

1. Reserve requirements that may be imposed on an economy’s banks by its central bank specify that banks by its central bank specify that banks reserve must be a minimum percentage of them ?

   A. assets
   B. deposits
   C. loans
   D. government bonds

2. Which function is performed by both commercial banks and central banks ?

   A. Acting as bankers to the government
   B. Advising the government on monetary policy
   C. Dealing in foreign exchange
   D. Fixing the main interest rate

3. If the banks in an economy operate with a reserve ratio of 20 percent then the money multiplier is ?

   A. 4
   B. 20
   C. 25
   D. 5

4. Suppose Imtiaz moves his Rs1,000 demand deposit from Bank A to Bank B. If both banks operate with a reserve ratio of 10 percent What is the potential change in money supply as a result of Gerard’s action ?

   A. Rs 10,00
   B. Rs 1,000
   C. Rs 9,000
   D. Rs 0

5. Assume that commercial banks are holding excess reserves because business firms and consumers are not willing to borrow money A decrease in the discount rate is likely to ?

   A. increase the money supply because it is now cheaper for banks to borrow from the central bank
   B. decrease the money supply because it will now be more expensive for business firms and consumers to borrow money
   C. Not change the money supply because banks already have excess reserves they cannot lend
   D. Decrease the money supply because it is now cheaper for banks to borrow from the central bank instead instead of buying government securities

6. If banks and the private sector decide to hold less cash the money multiplier will be ?

   A. Unchanged
   B. Larger
   C. Smaller
   D. Unstable

7. Which of the following payment instruments introduced by the banks is known as plastic money ?

   A. Bearer cheques
   B. Credit Cards
   C. Demand Drafts
   D. Gift Cheques

8. When banks prepare their balance sheets. They show the money lent in ?

   A. Liability
   B. Assets
   C. Both assets and liabilities
   D. None

9. A bank has excess reserves to lend but is unable to find anyone to borrow the money This will _________ the size of the money multiplier?

   A. reduce
   B. have no effect on
   C. increase
   D. double

10. If the quantity of money demanded exceeds the quantity of money supplied then the interest rate will ?

    A. change in a certain direction
    B. remain constant
    C. fall
    D. rise