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Home Questions 9WZJJCM2Q4
Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Money and Banking

Question:

Match the following:

1. Qualitative measure A. Cash reserve ratio
2. Quantitative measure B. Controls excess demand
3. Rise in bank rate C. Moral suasion
4. Credit creation D. Commercial bank

 

Options:

1- A, 2- C, 3-D, 4-B

1- A, 2- D, 3-B, 4-C

1- C, 2- A, 3-B, 4-D

1- B, 2- A, 3-C, 4-D

Correct Answer:

1- C, 2- A, 3-B, 4-D

Explanation:

With the help of monetary policy, money supply in the economy can be controlled in the following ways:

  • Quantitative: Bank rate, repo rate, reverse repo rate, open market operations, CRR, SLR etc.
  • Qualitative : Imposing margin requirements, moral suasion etc.

Rise in bank rate will lead to a rise in the rate of interest, which will eventually discourage people to take loan. It will reduce the purchasing power of people and solve the problem of excess demand.

Credit creation is done with the help of commercial banks in the economy.

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