Monetary Policy & Banking System

What is the impact of a high Cash Reserve Ratio (CRR)?

• Increases money supply

• Decreases money supply

• Has no impact on money supply

• Increases lending rate

How does a decrease in the repo rate affect the economy?

• Increases borrowing costs

• Decreases borrowing costs and stimulates spending

• Has no effect on borrowing

• Increases savings rates

Why are G-Secs considered a low-risk investment?

• They offer very high returns

• They are guaranteed by the government

• They are traded on the stock market

• They are insured by private companies

What happens when the RBI lowers the repo rate?

• Loans become more expensive

• Loans become cheaper

• Savings rates increase

• Inflation increases

What is the effect of a higher reverse repo rate?

• Banks lend more money

• Banks deposit more money with the RBI

• Interest rates on loans decrease

• The economy grows faster

If the RBI wants to control inflation, what might it do?

• Lower the repo rate

• Increase the repo rate

• Print more money

• Reduce taxes

What is the effect of the 2008 financial crisis on global monetary policy?

• Increased global trade

• Led to coordinated international monetary responses

• Reduced the role of central banks

• Caused inflation in all countries

How does monetary policy affect the stock and debt markets?

• Low rates favor stocks, high rates favor debt

• High rates favor stocks, low rates favor debt

• Monetary policy has no impact

• Only affects the stock market

What is the effect of foreign investor money being pulled out of India?

• Strengthening of the Rupee

• Weakening of the Rupee

• No change in the value of the Rupee

• Strengthening of Indian stocks

What is the policy dilemma faced by central banks?

• Balancing inflation control and economic growth

• Balancing loan approvals and deposit rates

• Balancing stock market regulation and currency exchange

• Balancing fiscal and monetary policy