Economics MCQs

Page No. 293

The main reason that people hold money to buy things is referred to as the ?


aProfit motive


bPrecautionary motive


cTransactions motive


d speculation motive


View Answer Transactions motive

Which of the following events will lead to an increase in the demand for money ?


aAn increase in the interest rate


b An increase in the level of aggregate output


cA decrease in the price level


d An increase in the supply of money



If the quantity of money demanded exceeds the quantity of money supplied then the interest rate will ?


achange in a certain direction


bremain constant


cfall


drise


View Answer rise

A bank has excess reserves to lend but is unable to find anyone to borrow the money This will _________ the size of the money multiplier?


areduce


b have no effect on


cincrease


ddouble


View Answer reduce

The difference between a bank’s actual reserves and its required reserves is its?


arequired reserve ratio


bprofit margin


cexcess reserves


dnet worth


View Answer excess reserves

A checking deposit in a bank in considered _________ of that bank?


aan asset


bcapital


c net worth


da liability


View Answer a liability

Money that a government has required has required to be accepted in settlement of debts is ?


abarter money


bcurrency value


c legal tender


d commodity money


View Answer legal tender

Which one of the following is not true ?


aThe difference between the price at which commercial bank sells an asset to the central bank and the price it agrees to buy it back can be expressed as an annualized percentage of the selling price and this is called the refinancing rate


bCommercial banks may borrow from and lend to each other and the interest rate at which they do this is called the refinancing rate


c In the UK the refinancing rate is known as the repo rate and in the USA it is referred to as the discount rate.


d the central bank has bought some assets from a commercial bank with an agreement that the commercial bank will buy them back at a later date, then this would be called a report



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 ?


arise by an amount that depends on the bank’s reserve ratio


brise by less than the amount of the deposit


cfall 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



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


bThe money supply increase by less than Rs 1,000


cthe money supply decrease by more than Rs 1,000


d The money supply is unaffected



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