money supply, banking & financial institutions section 7 MCQ Questions & Answers Detailed Explanation

Question : 1

Which of the following measures would result in an increase in the money supply in the economy?

1. Purchase of government securities from the public by the Central Bank
2. Deposit of currency in commercial banks by the public
3. Borrowing by the government from the Central Bank
4. Sale of government securities to the public by the Central Bank

a) 2 and 4

b) 1 only

c) 1 and 3

d) 2, 3 and 4

Question : 2

Consider the following statements:

1. Open Market Operation is a monetary policy tool
2. Open Market Operations take place in the secondary market
3. Sterilization is a monetary policy tool

a) (i) & (iii) only

b) (iii) only

c) (i) only

d) All of the above

Question : 3

Consider the following statements regarding Foreign Direct Investment (FDI):

1. FDI investment happens through the secondary market
2. FDI investment is about equity securities
3. FDI investment is about debt securities

a) (i) & (ii) only

b) (i) & (iii) only

c) (i) only

d) (ii) only

Question : 4

What are the causes of inflation?

1. Increase in demand for goods & services
2. Decrease in the supply of goods & services
3. Decrease in demand for goods & services
4. Increase in the supply of goods & services

a) 3 and 4

b) 1 and 2

c) 1 and 4

d) 2 and 3

Question : 5

Pegging up of a currency means, fixing the value of a currency

a) at a higher level

b) leaving it to market forces

c) at a constant level

d) at a lower level