Test: Central Banking - Class 10 MCQ

"Lender of Last Resort" refers to the central bank's role in providing financial assistance to commercial banks that are in distress, thus ensuring stability in the banking system.

Credit Rationing involves the central bank fixing credit quotas for member banks, ensuring that lending is aligned with monetary policy goals and controlling inflation.

Increasing the CRR during inflation reduces the amount of money banks can lend, thereby controlling the money supply and helping to curb inflation.

Lowering the SLR during deflation encourages more lending by increasing the liquidity available to banks, stimulating economic activity.

The CRR requires commercial banks to hold a certain percentage of their deposits with the central bank, thus regulating the amount of money available for lending and helping to control inflation.

The SLR requires banks to maintain a specified percentage of their total assets in liquid assets, ensuring they have enough liquidity to meet their obligations.

Raising the bank rate indicates a dear money policy, which makes borrowing more expensive and reduces the flow of credit, helping to control inflation.

The RBI is responsible for safeguarding India's foreign exchange reserves, maintaining the external value of the Indian Rupee, and conducting foreign exchange transactions as required.

The central bank's main function is to issue currency and regulate the money supply, which is crucial for maintaining economic stability. Unlike commercial banks, it does not engage in profit-making activities.

Commercial banks accept deposits from the public and offer loans, while central banks do not accept public deposits and are primarily focused on regulating the banking system and monetary policy.

The Credit Authorisation Scheme regulates the amount of credit that can be extended for specific purposes and requires prior approval, making it a qualitative measure.

The primary objective of the central bank is to ensure economic stability and promote social welfare, distinct from the profit-oriented goals of commercial banks.

To control inflation, the RBI sells government securities, which reduces the amount of money circulating in the economy and helps stabilize prices.

Margin Money is a qualitative credit control measure, while Bank Rate Policy, CRR, and Open Market Operations are quantitative measures aimed at controlling the money supply in the economy.

The Reserve Bank of India has the exclusive right to issue currency notes, a fundamental function that supports its role in regulating the money supply.

The Central Bank raises the bank rate to increase borrowing costs, which reduces the flow of credit and can help control inflation, thereby stabilizing the economy.

Maintaining relationships with organizations like the International Monetary Fund enhances the RBI's influence in global financial matters, aiding in economic stability and cooperation.

The RBI acts as a banker and advisor to the government, managing accounts and providing financial advice, which is crucial for effective monetary policy implementation.

The Reserve Bank of India was established on April 1, 1935. It plays a critical role in managing the country's monetary policy and banking system.

Moral Suasion involves the central bank persuading commercial banks to adhere to its monetary policy, influencing their lending practices without direct intervention.