Indian Economy › Monetary Policy & Money Supply – UPSC Prelims PYQs

Consider the following statements : Statement–I : In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes. Statement–II : Central Banks generally assume that they have the ability to counteract the rising consumer prices via monetary policy means.

Which one of the following is correct in respect of the above statements?

Which one of the following activities of the Reserve Bank of India is considered to be part of 'sterilization'?

With reference to the Indian economy, consider the following statements :

1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy government securities.
2. If the rupee is rapidly depreciating, RBI is likely to sell dollars in the market.
3. If interest rates in the USA or European Union were to fall, that is likely to induce RBI to buy dollars.

Which of the statements given above are correct ?

In India, which one of the following is responsible for maintaining price stability by controlling inflation ?

In India, the central bank’s function as the ‘lender of last resort’ usually refers to which of the following?

1. Lending to trade and industry bodies when they fail to borrow from other sources
2. Providing liquidity to the banks having a temporary crisis
3. Lending to governments to finance budgetary deficits

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If you withdraw ₹ 1,00,000 in cash from your Demand Deposit Account at your bank, the immediate effect on aggregate money supply in the economy will be

If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do ?

1. Cut and optimize the Statutory Liquidity Ratio
2. Increase the Marginal Standing Facility Rate
3. Cut the Bank Rate and Repo Rate

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The money multiplier in an economy increases with which one of the following?

Which one of the following statements correctly describes the meaning of legal tender money ?

Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC) ?

1. It decides the RBI's benchmark interest rates.
2. It is a 12-member body including the Governor of RBI and is reconstituted every year.
3. It functions under the chairmanship of the Union Finance Minister.

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Consider the following statements : With reference to the Constitution of India, the Directive Principles of State Policy constitute limitations upon

1. legislative function.
2. executive function.

Which of the above statements is/are correct ?

When the Reserve Bank of India reduces the Statutory Liquidity Ratio by 50 basis points, which of the following is likely to happen?

With reference to Indian economy, consider the following :

1. Bank rate
2. Open market operations
3. Public debt
4. Public revenue

Which of the above is/are component/components of Monetary Policy?

The terms ‘Marginal Standing Facility Rate’ and ‘Net Demand and Time Liabilities’, sometimes appearing in news, are used in relation to

In the context of Indian economy, which of the following is/are the purpose/purposes of ‘Statutory Reserve Requirements’?

1. To enable the Central Bank to control the amount of advances the banks can create
2. To make the people’s deposits with banks safe and liquid
3. To prevent the commercial banks from making excessive profits
4. To force the banks to have sufficient vault cash to meet their day-to-day requirements

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If the interest rate is decreased in an economy, it will

An increase in the Bank Rate generally indicates that the

Consider the following liquid assets:

1. Demand deposits with the banks
2. Time deposits with the banks
3. Savings deposits with the banks
4. Currency The correct sequence of these assets in the decreasing order of liquidity is

In the context of Indian economy, ‘Open Market Operations’ refers to

Supply of money remaining the same when there is an increase in demand for money, there will be

Which of the following measures would result in an increase in the money supply in the economy?

1. Purchase of government securities from the public by the Central Bank
2. Deposit of currency in commercial banks by the public
3. Borrowing by the government from the Central Bank
4. Sale of government securities to the public by the Central Bank

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The lowering of Bank Rate by the Reserve Bank of India leads to

Which of the following terms indicates a mechanism used by commercial banks for providing credit to the government ?

When the Reserve Bank of India announces an increase of the Cash Reserve Ratio, what does it mean?

Consider the following statements:

1. The repo rate is the rate at which other banks borrow from the Reserve Bank of India.
2. A value of 1 for the Gini Coefficient in a country implies that there is perfectly equal income for everyone in its population.

Which of the statements given above is/are correct?

Consider the following:

1. Currency with the public
2. Demand deposits with banks
3. Time deposits with banks

Which of these are included in Broad Money (M3) in India?

The banks are required to maintain a certain ratio between their cash in hand and total assets. This is called

The sum

of which of the following constitutes Broad Money in India? I. Currency with the Public II. Demand deposits with banks III. Time deposits with banks IV. Other deposits with RBI

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Which one of the following is not an instrument of selective credit control in India?

Bank Rate implies the rate of interest