MONEY AND BANKING TEST
TEST 2
1. What is meant by reverse repo rate?
2. To reduce the supply of money in the economy, Central Bank_______________
(a) raises CRR (b) lowers the repo rate
(c) lowers the margin (d) buys govt. securities from the market
3. Give three points of difference between commercial bank and central bank?
4. How are money multiples and CRR related? Explain through an example.
5. What are open market operations? How do they affect the supply of money and credit?
6. Explain the banker’s bank function of central bank?
7. How do commercial banks create credit? Explain.
8. How the following tool can be used to control credit by the central bank in an economy?
(a) Open market operation
(b) margin requirement