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 ?

Related Mcqs:

1. Suppose the State Bank purchases a Rs 1,000 government bond from you. If you deposit the entire Rs 1,000 in you bank what is the total potential change in the money supply as a result of the State Bank’s action if the your bank’s reserve ratio is 20 percent ?

   A. Rs 4,000
   B. Rs 5,000
   C. Rs 1,000
   D. Rs 0

2. 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

3. Bance Solida has, in the past, always operated with a reserve ratio of 25 percent. It has now been taken over by Gung-Ho Bank Which operates with a reserve ration of 12½ percent, Assuming that Banca Solida adopts the business practices of its new owner, What will be the effect on money supply in the country in which Banca Solida operates ?

   A. Money supply will increase because Banca Solida will increase its loans
   B. The effect on money supply cannot be determined from the information given
   C. Money supply will decrease because the loans will have to be repaid
   D. Money supply will be unchanged because the central bank has made no policy changes

4. For the Central bank to keep the interest rat unchanged as the government increase spending, the Central Bank must continue to ?

   A. decrease the money supply
   B. increase the money supply
   C. increase the demand for money
   D. decrease the demand for money

5. 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

6. Suppose all banks maintain a 100 percent reserve ratio. If an individual deposits Rs 1,000 of currency in a bank ?

   A. the money supply increases by more than Rs 1,000
   B. the money supply increase by less than Rs 1,000
   C. the money supply decrease by less than Rs 1,000
   D. the money supply decrease by more than Rs 1,000
   E. The money supply is unaffected

7. 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

8. Central bank’s rate of lending to commercial banks is called ?

   A. Interest rate
   B. Discount rate
   C. Money rate
   D. Control rate

9. If The Central bank tries to keep the interest rate constant when the economy is operating on the steep part of the AS curve, _________ will occur?

   A. a hyperinflation
   B. a depression
   C. stagflation
   D. a recession

10. Suppose the central bank purchases a government bond from a person who deposits the entire amount received from the sale in her bank the money supply will ?

    A. rise by an amount that depends on the bank’s reserve ratio
    B. rise by less than the amount of the deposit
    C. fall by exactly the amount of the deposit as long as the bank does not change its reserve ratio
    D. fall by exactly the amount of the deposit as long as the bank does not change its reserve ratio
    E. be unchanged