Macroeconomics - Money, Banking, and RBI - MCQs with answers - Part II
1) What is 'Bank rate'?a) The rate at which commercial banks borrow money from RBI
b) The rate at which commercial banks lend money to customers
c) The rate at which commercial banks lend money to RBI
d) none of the above
View Answer / Hide AnswerANSWER: a) The rate at which commercial banks borrow money from RBI
Bank rate is the rate at which commercial banks can borrow money from the RBI. If the rate is higher, then taking money from RBI becomes difficult, so the banks will lend less to public. And vice-versa.
a) the total assets of RBI
b) the total liability of RBI
c) the total debt of the government
d) the total foreign exchange of RBI
View Answer / Hide AnswerANSWER: b) the total liability of RBI
This includes the currency (notes and coins in circulation and vault cash of commercial banks) along with the deposits held by the Government of India ad commercial banks with RBI.
a) selling government securities
b) buying government securities
c) borrowing money from commercial banks
d) none of the above
View Answer / Hide AnswerANSWER: b) buying government securities
a) selling government securities
b) buying government securities
c) borrowing money from commercial banks
d) none of the above
View Answer / Hide AnswerANSWER: a) selling government securities
a) provide incentives to commercial banks to lend more to public
b) provide incentives to commercial banks to lend less to public
c) increase the money supply in the market
d) none of the above
View Answer / Hide AnswerANSWER: b) provide incentives to commercial banks to lend less to public
Bank rate is the rate at which commercial banks can borrow money from the RBI. If the rate is higher, then taking money from RBI becomes difficult, so the banks will lend less to public. And vice-versa.
a) protection
b) liberalization
c) stabilization
d) sterilization
View Answer / Hide AnswerANSWER: d) sterilization
RBI does this by performing a host of operations, for example controlling the Bank Rate, buying or selling government securities, etc
