Monetary Policy and Inflation Quiz

<p>A sustained decrease in the price of goods and services (C)</p> Signup and view all the answers

<p>Decreased purchasing power (A)</p> Signup and view all the answers

<p>Decreasing the money supply (B)</p> Signup and view all the answers

<p>Grocery items (A)</p> Signup and view all the answers

<p>To control the interest rate and money supply (A)</p> Signup and view all the answers

<p>To control the availability of funds in the banking system (C)</p> Signup and view all the answers

<p>The money supply increases as banks are more likely to sell securities to the central bank (D)</p> Signup and view all the answers

<p>By regulating the amount of money available for spending in the economy (A)</p> Signup and view all the answers

<p>The money supply decreases as banks are less likely to borrow from the central bank (D)</p> Signup and view all the answers

<p>A lower repo rate increases the availability of funds (D)</p> Signup and view all the answers

<p>To manage inflation levels (C)</p> Signup and view all the answers

<p>By helping to control inflation and prevent economic fluctuations (C)</p> Signup and view all the answers

<p>To control the flow of money in the economy (D)</p> Signup and view all the answers

<p>Demand-side factors and Supply-side factors (B)</p> Signup and view all the answers

<p>By influencing the cost of borrowing and the attractiveness of saving, thereby impacting consumption. (A)</p> Signup and view all the answers

<p>The price of crude oil (C)</p> Signup and view all the answers

<p>Transmission lag (A)</p> Signup and view all the answers

<p>To achieve a medium-term inflation target of 4% with a tolerance range of 2% to 6%. (D)</p> Signup and view all the answers

<p>Minimizing the transmission lag from policy changes to desired outcomes. (C)</p> Signup and view all the answers

<p>By influencing the cost of borrowing and the attractiveness of saving. (D)</p> Signup and view all the answers

<p>Repo rate changes only influence demand-side factors, not supply-side factors. (B)</p> Signup and view all the answers

<p>The repo rate is the rate at which the central bank lends money to commercial banks, while the reverse repo rate is the interest rate at which commercial banks borrow money from the central bank. (C)</p> Signup and view all the answers

<p>The time it takes for changes in interest rates to affect the economy. (B)</p> Signup and view all the answers

<p>Investment channel (D)</p> Signup and view all the answers

<p>The MSF rate is always higher than the repo rate. (A)</p> Signup and view all the answers

<p>All of the above. (D)</p> Signup and view all the answers

<p>By influencing consumer and business confidence and their outlook for the future. (B)</p> Signup and view all the answers

<p>To control banks' liquid reserves and manage the money supply. (D)</p> Signup and view all the answers

<p>1% (C)</p> Signup and view all the answers

<p>To control inflation through the purchase and sale of government securities. (A)</p> Signup and view all the answers

<p>By setting a rate at which banks can borrow short-term funds from the RBI against government securities. (B)</p> Signup and view all the answers

<p>The Bank Rate is a penalty for banks not meeting SLR and CRR requirements, while the Repo Rate is a tool for overnight lending. (C)</p> Signup and view all the answers

<p>Liquidity in the market will decrease, leading to higher interest rates. (A)</p> Signup and view all the answers

<p>Market Stabilization Scheme (B)</p> Signup and view all the answers

<p>To manage short-term liquidity fluctuations caused by foreign capital flows. (B)</p> Signup and view all the answers

<p>To adjust liquidity and money supply through overnight lending to banks. (B)</p> Signup and view all the answers

<p>By providing a penalty to banks if they do not meet the required reserve ratios (SLR and CRR). (C)</p> Signup and view all the answers

<p>Reduced capital flow to the economy, resulting in lower stock prices. (B)</p> Signup and view all the answers

<p>Capital Goods (D)</p> Signup and view all the answers

<p>To control escalating inflation and re-anchor inflation expectations. (C)</p> Signup and view all the answers

<p>An increase in the repo rate leads to a decrease in the flow of money, as companies have less capital available for investment. (C)</p> Signup and view all the answers

<p>EMIs are expected to increase as banks and NBFCs adjust their loan interest rates. (B)</p> Signup and view all the answers

<p>To manage inflation expectations and stabilize the price level. (D)</p> Signup and view all the answers

<p>Decline in global commodity prices. (C)</p> Signup and view all the answers

<p>6% (A)</p> Signup and view all the answers

The fixed interest rate at which RBI lends to banks overnight.

A mechanism allowing banks to borrow money from RBI against collateral.

A sustained increase in the general price level of goods and services.

The decrease in the price index of a basket of goods and services.

The value of currency in terms of the quantity of goods it can buy.

The total demand for goods and services within an economy.

Macroeconomic policy by RBI to control money supply and interest rates.

Actions to align aggregate supply with demand to stabilize prices.

A method used by central banks, like the repo rate, to control the money supply.

The process of increasing or decreasing the amount of funds available in the economy.

Incentivizes banks to sell securities for cash, increasing money supply.

Discourages banks from borrowing, reducing money supply.

The process of central banks providing cash to banks through securities transactions.

The availability of liquid assets to a bank or an economy.

Open Market Operations (OMOs) involve selling or buying securities by RBI to manage liquidity in the market.

A scheme by RBI to regulate liquidity by selling government securities and thus stabilizing the financial market.

The interest rate at which RBI lends long-term funds to banks, influencing overall money supply.

Assets pledged by banks (usually government securities) to secure a loan from RBI at the repo rate.

The repo rate acts as a benchmark for banks to price loans for their customers.

The process of ensuring that banks have enough cash to meet their short-term obligations.

Methods through which monetary policy impacts the economy.

The pathway where changes in interest rates affect spending and investment.

How changes in monetary policy affect credit availability to businesses and consumers.

The influence of monetary policy on currency value affecting trade dynamics.

The reinforcement of wealth effect from rising asset prices due to policy changes.

How perceptions about the economy influence consumer and business behavior.

The rate RBI pays banks for keeping excess funds with it.

The penal rate at which the central bank lends to banks beyond the repo rate.

Factors leading to inflation can be demand-driven or supply-driven.

Inflation caused by higher demand for goods and services.

Influences on inflation related to production costs, like commodity prices.

Adjustments to the repo rate primarily impact demand through interest rates.

The delay between a policy change and its effect on the economy.

The goal to keep inflation around 4% within a 2-6% range.

The difficulty in translating repo rate changes into economic actions.

The desired inflation rate set by the RBI is 4%.

The maximum acceptable inflation rate is 6% (4% + 2%).

The minimum acceptable inflation rate is 2% (4% - 2%).

An increase in repo rate typically reduces the flow of capital to the economy.

Higher interest rates lead to a slump in stock markets due to reduced investment.

An increase in repo rate causes banks to raise loan and EMI rates.

Sectors like capital goods are more affected by rate increases due to high debt.

The RBI increases the repo rate to control inflation and reduce money flow.