MONEY- BANKING IMPORTANT QUESTIONS CLASS 12

TRUE/FALSE

1. Banks keep all of their deposits on hand as reserves.
2. The legal reserve requirement is the amount of capital that a bank must have in order to be chartered by the government.
3. The legal reserve requirement is determined by the president.
4. If the legal reserve requirement is 0.50, then a Rs.100 deposit will allow the bank to create loans of Rs.50.
5. If a bank is allowed to lend Rs.900 on a new deposit of Rs.1000, then the legal reserve requirement is 0.10.
6. Increases in the legal reserve requirement increase the amount of money in banking system can create.
7. Banks are eager to provide loans, thereby expanding the money supply , during a recession.
8. All financial institutions are not banking institutions.
9. Commercial banks do not have the note-issuing authority, but they do not contribute to money supply in the economy.
10. CRR and SLR are fixed by the commercial banks themselves.
11. Open market operations are meant to impact money supply in the economy.
12. Demand deposits are equal to cash deposits with commercial banks.
13. When CRR is raised, flow of credit is enhanced in the economy.
14. Demand deposits with commercial banks are a part of money supply.
15. Money supply in the economy is equal to notes and coins issued by the central bank.
16. Commercial bank play no role in the stock of money supply in the economy.
17. If the bank buy government securities, their capacity to create credit is reduced.
18. When margins ae raised, demand for loans is negatively impacted.
19. Market rate of interest tends to be positively related to the bank rate.
20. By accepting deposits, commercial bank facilitate capital formation.