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MCQ on money and banking for SBI PO

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Answer the following MCQ on Money and Banking

Who benefits the most during the inflationary period?

(a) corporate servants

(b) creditors

(c) entrepreneurs

(d) government servants


Solution: (c)
Bank Rate Policy, open market operations and variation of Cash Reserve Ratios, etc. are instruments of monetary policy. With the help of these instruments, the Reserve Bank of India controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability.

Which of the following is not helpful in controlling the money supply?

(a) Free market policy

(b) CRR

(c) Bank Rate

(d) Change in margin requirement


Solution: (a)
The Central Bank of a country regulates money supply with the help of open market operations, changing the reserve requirements (CRR) and changing discount rate (bank rate). Besides, banks are required to maintain liquid assets in the form of gold, cash and approved securities (margin requirements); also known as Statutory Liquidity ratio. In India, the Reserve Bank of India has recently been resorting more to open market operations.

Capital market deals with

(a) Short-term fund

(b) Long-term fund

(c) Cash

(d) Both long and short-term funds


Solution: (b)
Capital markets are financial markets for the buying and selling of long-term debt or equity-backed securities. These markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long term investments.

The terms ‘Bull’ and ‘Bear’ are associated with

(a) Banking

(b) Foreign Trade

(c) Stock Market

(d) Internet Trade


Solution: (c)
The terms ‘bull’ and ‘bear’ describe upward and downward trends respectively of the stock market. A bear market refers to a decline in prices, usually for a period of a few months, in a single security or asset, group of securities or the securities market as a whole. A bull market is when prices are rising.

What does the letter ‘e’ denotes in the term ‘e-banking’?

(a) Essential Banking

(b) Economic Banking

(c) Electronic Banking

(d) Expansion Banking


Solution: (c)
‘e-banking’ stands for electronic banking which involves the use of computers to carry out banking transactions such as withdrawals through cash dispensers or transfer of funds at point of sale. It is also known as online or interne banking.

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