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Answer fast: money supply and RBI tools.

Exercise and reference answers

Questions
  1. Question
    M1 equals currency plus
    Choices
    1. demand deposits
    2. time deposits
    Correct choice
    demand deposits
  2. Question
    Most commonly used measure of money supply
    Choices
    1. M1
    2. M3
    Correct choice
    M3
  3. Question
    RBI buys bonds. Money supply
    Choices
    1. rises
    2. falls
    Correct choice
    rises
  4. Question
    Bank rate goes up. Money supply
    Choices
    1. rises
    2. falls
    Correct choice
    falls
  5. Question
    Reserve ratio rises. Credit creation
    Choices
    1. falls
    2. rises
    Correct choice
    falls
  6. Question
    Reverse repo means the RBI is
    Choices
    1. injecting funds
    2. absorbing funds
    Correct choice
    absorbing funds
Instructions
Pick the right answer before the timer runs out.

Explanation

M1 is currency plus demand deposits, and M3 adds net time deposits to become the headline measure. Buying bonds pays reserves in and raises supply a higher bank rate makes borrowing dearer and lowers it. A higher reserve ratio leaves less to lend. Reverse repo withdraws funds, repo supplies them.
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