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Quiz on Credit Creation by Commercial Banks
This quiz has 20 questions with multiple choice. You can select one answer for each question. After complete all you have to submit to see your score.
Regards
Dr. Asad Ahmad
PGT Economics
KV IIM, Lucknow
+91-8770981320
eco.lecturer1984@gmail.com
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1. The central bank can increase availability of credit by
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1 point
Raising Repo Rate
Raising Reverse Repo rate
Buying Securities
Selling Securities
2. The main aim of the commercial banks is
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1 point
Social Welfare
Accepting deposits
lending loans
both b and c
3. Credit creation power of the commercial banks gets limited by which of the following?
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1 point
Banking habits of the people
Cash reserve ratio
Credit policy of the central bank
All of the above
4. Commercial banks create credit by
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1 point
Deposits
treasury bills
Bills of Exchange
None pf the above
5.
A bank has Rs. 5 million in cash. The minimum reserve ratio is 20%. What is maximum potential increase in total deposits:
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1 point
0
10
25
50
6. The ratio of total deposit which a bank has to keep with the RBI is
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1 point
Cash Reserve Ratio
Statutory Liquidity ratio
Repo Rate
Reverse Repo rate
7. Credit cards are issued by the banks to
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1 point
Encourage consumer spendings
Increase Aggregate Demand
both A and B
None of these
8. Other name of Legal reserve ratio is
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1 point
Cash reserve Ratio
Statutory Liquidity Ratio
Both A and B
Variable Reserve Ratio
9.
Commercial banks are able to create money by:
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1 point
Printing money
Making loans
Moral suasion
Selling government bonds
10.
When a commercial bank creates credit, its immediate effect is that it raises:
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1 point
The exchange rate
The interest rate
The money supply
The real national income
11.
Demand deposits are money because:
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1 point
They are backed by gold
They are assets of banks
They can be used to make payments
All of the above
12.
Credit money is created by:
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1 point
Commercial bank
Central bank
Government
All of the above
13. Commercial banks accept deposits and provide:
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1 point
Money
Cheque
Loans
Bill of exchange
14.
The power of a bank to create credit is affected by:
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1 point
The cash reserve requirement
The amount of cash available
The number of branches of a bank
Both (a) & (b)
15.
Demand deposits are:
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1 point
Bank notes
Money (they can be used to make payments)
Considered as near money
Legal money
16. A bank is creating credit of Rs. 50000, and Legal Reserve Ratio is 10%. Calculate the Value of Money Multiplier.
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1 point
2.5
5
7.5
10
17. A bank is creating credit of Rs. 50000, and Legal Reserve Ratio is 10%. Calculate the Value of Initial deposit.
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1 point
2500
4000
5000
10000
18. When RBI increases Legal Reserve Ratio, credit creation capacity of commercial banks are likely to be
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1 point
No Chnage
Decrease
Increase
None of the Above
19. When RBI decreases Cash Reserve Ratio, credit creation capacity of commercial banks are likely to be
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1 point
No Chnage
Decrease
Increase
None of the Above
20. When RBI Increases Bank Rate, credit creation capacity of commercial banks are likely to be
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1 point
No Chnage
Decrease
Increase
None of the Above
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