Central Bank and the Banking System: Macroeconomics Online Test

One important Quantitative Monetary tool with the Federal Reserve is the:
Moral Suasion
Open Market Operations
Credit Rationing
Margin Requirements
Regulation of Consumer Credit
The Central Bank performs all of the following functions except:
Acting as the banker to the Government
Acting as the lender of the last resort
Acting as a Clearing House
Accepting Deposits from Commercial Banks
Accepting Deposits from the general Public
The Minimum Lending Ratio is the Minimum rate at which the Federal Reserve:
Re-discounts first class bills
Buys securities from the E.E.C market
Lends money to the IMF
Invests in industrial expansion abroad
All of the above
When the Central Bank purchases securities in the Open Market Operations, the credit:
contracts by a greater amount than the purchase amount
contracts by a lesser amount than the purchase amount
expands by a greater amount than the purchase amount
expands by a lesser amount than the purchase amount
Remains the same
The Central Bank exercises a number of selective controls to control credit. These do not include:
Minimum Down Payments on Consumer Loans
Maximum Down Payments on particular loans
Margin requirements on purchase of securities
Maximum period of repaying consumer loans
None of the above
The term used for persuasion of banks to adhere to the Federal Reserve’s policies and desires is:
Moral Values
Moral Suasion
Open Market Operations
Statutory Liquidity Ratio
Margin Requirements
The Central Bank undertakes the primary function of:
Providing for maximization of profits of its shareholders
Assisting the development in industry and Commerce
Assisting the development efforts of the Government
Declaring and executing the Monetary Policy
Narrowing the export-import gap
Which of the following does not get categorized under the functions of the Central Bank?
Organizing the Money and Bills Market
Representing the country in International Monetary Conferences
Maintaining the stock of a country’s Foreign Exchange Reserve
Collecting and publishing statistical information related to banking
None of the above
The Federal Reserve can decrease the Bank credit by: I decreasing the Bank Rate II increasing the Bank Rate III decreasing the Cash Reserve requirements
I only
II only
III only
I and III
II and III
The feasibility of the Central Bank’s Bank Rate Policy depends upon:
Sensitivity of Commercial Bank’s demand for funds from the Central Bank
Interest Rate Structure in the Money Market
The extent of dependence of the Commercial Banks on Central Bank for loans
Overall Supply of funds in the market
All of the above

The Central Bank controls the Money Supply or Flow of Credit in the Economy. This means Central Bank plays multiple roles and functions to control the Credit in the economy. Here is a 7-minute short Multiple Choice questions test relating to the Central Bank, Central Bank’s Functions, Credit Creation, Central Bank’s Quantitative Functions, Central Bank’s Qualitative Functions, Banks, Commercial Banks, Central Bank, Generation of Money and other related concepts. While taking this test, go through all the options very carefully and then, mark your answers.



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