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1.	Name the monetary measure indicated in the following statements. Also indicate, wheter the following measures will be adopted during excess demand or defcient demand. (i) RBI starts seeling Govemment secur ities to the public. (ii) Instead of 80% now 90% of the security amount will be given as loan. (iii) It resulted in increase in interest rate charged by commercial bank from the borrowers. (iv) RBI advised SBI to stop advertising for home loans in order to discourage lending. (v) Central bank reduces the amount of time and demand deposits required to be kept as reserves. (vi) RBI instructed not to advance loans to people with income above rs 5 lakhs per annum.
Answer» (i) open Market operation (ii) Bank Rate (iii) Bank rate (v) Legal reserve requirements (vi) Selective Credit Controls Measures adopted during Excess Demand will be (i) (iii) (iv) and (vi).Measures adopted during deficient Demand will be (ii) and(iv)

2.	During excess demand, central bank __ the margin.A. DecreasesB. increasesC. RemovesD. Does not change
Answer» Correct Answer - b B. During excess demand, central bank increases the margin.

3.	Which of the following is not the reason for excess demand?A. Fall in the propensity to consumeB. Reduction in taxesC. Increase in investmentsD. Deficit Financing
Answer» Correct Answer - a A. Fall in the propensity to consume is not the reason for excess demand.

4.	______ is exercised through discussions, letters and speeches to banksA. Moral suasionB. Selective Credit ControlsC. Margin RequirementsD. Open Market Operations
Answer» Correct Answer - a A. Moral suasion is exercised through discussions, letters and speeches to banks.

5.	Change in Government Spending is a part of :A. Monestary PolicyB. Fiscal PolicyC. Either (a) or (b)D. Neither (a) nor (b)
Answer» Correct Answer - b B. Change in Government Spending is a part of Fiscal policy.

6.	Define deflationary gap. Or Give the meaning of deflationary gap.
Answer» Deflationary gap refers to the gap by which actual aggregate demand falls short of the aggregate demand required to establish full employment equilibrium.

7.	Defficient Demand indicates:A. Under employment equilibriumB. Over Full employment equilibriumC. Full employment equilibriumD. None of these
Answer» Correct Answer - a A. Deficient Demand indicates Under employment equilibrium.

8.	Aggregate demand can be increased by: (choose the correct atternative)A. increasing bank rateB. selling government securities by Reserve Bank of IndiaC. Increasing cash reserve ratioD. none of the above
Answer» Correct Answer - d D

9.	If an economy is to control recession like most of the Euro-Zone nations, which of the following can be appropriate:A. Reducing Repo RateB. Reducing CRRC. Both a and bD. None of a and b
Answer» Correct Answer - c C. If an economy is to control recession like most of the Euro-Zone nations Reducing Repo Rate, Reducing CRR can be appropriate.

10.	Monday Policy is the policy of ___ to control money and credit creation in the economy.A. Central GovermmentB. Central BankC. Both a and bD. None of these
Answer» Correct Answer - b B. Monetary Policy is the policy of Central Bank to control money and credit creation in the economy.

11.	Increase in cash reserve ratio will lead to:A. Fall in Aggregate DemandB. Rise in Aggregate DemandC. No change in Aggregate DemandD. None of these
Answer» Correct Answer - a A. Increase in cash reserve ratio will lead to Fall in Aggregate Demand.

12.	Excess demand leads to:A. increase in the level of employmentB. Decrease in the level of employmentC. No change in the level of employmentD. None of these
Answer» Correct Answer - c C. Excess demand leads to No change in the level of employment.

13.	A reduction in govermment spending leads to fall in the income and purchasing power of the people.
Answer» True, The level of output will not rise as economy is already at full employment level and there is no idle capacity in the economy.