Most Important Questions on RBI and Monetary Policy
1. The primary objective of the Monetary Policy Committee (MPC) is to
(a) Balance between market rates and policy rates
(b) To achieve the inflation target
(c) To maintain liquidity ratio in the country
(d) To implement amended RBI Act
Ans. B
2. Which of the following statement/s is/are true about the Monetary policy committee (MPC)?
1) The MP committee consists of 6 members, three for RBI and three from Government of India.
2) In case of a tie, the RBI Governor has the casting vote.
3) The meetings of Monetary policy are held at least 4 times in a year.
4) MPC uses a qualitative and quantitative approach to meet the inflation target.
(a) 1, 2 and 3
(b) 2 and 4
(c) 1, 2, 3 and 4
(d) 1 and 3
Ans. C
3. Which of the following statements is correct about the Monetary Policy Committee?
(a) The MPC is a 5-member body.
(b) The MPC is headed by a governmental official nominated by the Finance Ministry.
(c) The MPC is a non-statutory body.
(d) The Monetary Policy framework signed by the RBI mandates the MPC to limit inflation at 4% with +/- 2% leeway.
Ans. D
4. Monetary policy is framed by:
(a) RBI
(b) Ministry of Finance
(c) Commercial Banks
(d) Union Cabinet
Ans. A
5. Which of the following is true about the “policy rate” of the RBI?
(a) Reverse Repo Rate is the current benchmark key policy rate of RBI’s MPC
(b) Repo Rate is the current benchmark policy rate of RBI’s MPC
(c) Cash Reserve Rate is the current benchmark key policy rate of RBI’s MPC
(d) Statutory Liquidity Rate is the current benchmark key policy rate of RBI’s MPC
Ans. B
6. Which of the following is correct regarding the monetary policy of India?
(a) Government of a country is responsible for this policy.
(b) It does not include the inflation rate.
(c) It is related to the control of the supply of money.
(d) It is presented every month.
Ans. C
7. What should be the most crucial factor for a successful monetary policy?
(a) Financial awareness among people
(b) It should offer enough flexibility to take strategic calls
(c) Continuous increase in demand to fuel production
(d) Presence of strong financial institutions in both rural and urban areas
Ans. B
8. Arrange the following monetary policy tools in increasing order.
(a) Repo Rate > bank Rate> Reverse Repo
(b) Bank Rate > Reverse Repo rate >Repo Rate
(c) Reverse Repo Rate >Bank rate > Repo rate
(d) Reverse Repo Rate < Repo Rate < Bank Rate
Ans. D
9. In monetary policy committee, RBI governor has
(a) only a vote
(b) only casting vote
(c) both vote and casting vote
(d) none of the above
Ans. C
10. Consider the following options on Marginal Cost of funds based Lending Rates
1. This is the rate at which the RBI provides liquidity to bank with no collateral
2. The MCLR has replaced the Bank Rate
3. MCLR is very essential for the effective implementation of Monetary Policy
Choose the correct answer from the codes given below:
(a) 1 only
(b) 2 only
(c) 3 only
(d) All the above
Ans. C
11. Which of the following methods is adopted by the RBI under its Cheap Monetary Policy?
(a) It increases the repo rate
(b) It increases the bank rate
(c) It decreases the repo rate
(d) It decreases the bank rate
Ans. D
12. In a year, how many times in a year the Monetary Policy Committee (MPC) meets to form Monetary Policy?
(a) 1
(b) 2
(c) 3
(d) 4
Ans. D
13. Which rate is not regularly published by the Reserve Bank of India (RBI) in its Monetary Policy?
(a) Bank Rate
(b) Repo Rate
(c) Reverse Repo Rate
(D) SLR
Ans. D
14. Which of the following functions of RBI are related to Monetary Policy?
(a) Debt management
(b) bridging the balance of payments deficit
(c) To control inflationary pressures
(d) All of the above
Ans. D
15. In its bi-monthly monetary policy review when the Reserve Bank of India (RBI) reduces the CRR, what will not happen?
(a) Increases money supply
(b) Decreases interest rates on home loans, car loans, etc.
(c) Increase demand for money
(d) Increases inflation
Ans. C
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