QuizMaster

Assume that commercial banks are holding excess reserves because business firms and consumers are not willing to borrow money A decrease in the discount rate is likely to ?

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Assume that commercial banks are holding excess reserves because business firms and consumers are not willing to borrow money A decrease in the discount rate is likely to ?

A. increase the money supply because it is now cheaper for banks to borrow from the central bank
B. decrease the money supply because it will now be more expensive for business firms and consumers to borrow money
C. Not change the money supply because banks already have excess reserves they cannot lend
D. Decrease the money supply because it is now cheaper for banks to borrow from the central bank instead instead of buying government securities

Which of the following activities is one of the responsibilities of the Bank of England to the banking system ?

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Which of the following activities is one of the responsibilities of the Bank of England to the banking system ?

A. Assisting Banks that are in a difficult financial position
B. Auditing the various agencies and department of the government
C. Loaning money to other countries that are friendly to the UK.
D. Issuing new bonds to finance the PSBR.

If there is a general shortage of liquidity in the money market then ?

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If there is a general shortage of liquidity in the money market then ?

A. The banks will increase their lending
B. The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will fall and the central bank may be expected to reduce the supply of liquidity to the banks
C. The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will rise and the long-term interest rate may be expected to rise as a result
D. the long-term interest rate in the economy will rise and the central bank will raise its interest rate in response
E. The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will rise and the central bank may be expected to increase the supply of liquidity to the banks.

Suppose the State Bank purchases a Rs 1,000 government bond from you. If you deposit the entire Rs 1,000 in you bank what is the total potential change in the money supply as a result of the State Bank’s action if the your bank’s reserve ratio is 20 percent ?

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Suppose the State Bank purchases a Rs 1,000 government bond from you. If you deposit the entire Rs 1,000 in you bank what is the total potential change in the money supply as a result of the State Bank’s action if the your bank’s reserve ratio is 20 percent ?

A. Rs 4,000
B. Rs 5,000
C. Rs 1,000
D. Rs 0

Suppose Imtiaz moves his Rs1,000 demand deposit from Bank A to Bank B. If both banks operate with a reserve ratio of 10 percent What is the potential change in money supply as a result of Gerard’s action ?

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Suppose Imtiaz moves his Rs1,000 demand deposit from Bank A to Bank B. If both banks operate with a reserve ratio of 10 percent What is the potential change in money supply as a result of Gerard’s action ?

A. Rs 10,00
B. Rs 1,000
C. Rs 9,000
D. Rs 0