Money, Banking and Financial Institutions - One Line Questions
1.
Which of the following is a non-banking financial institution (NBFI)? —
An insurance company
2.
What is a financial institution? —
An entity that provides financial services to clients
3.
What is a bank? —
A financial institution that accepts deposits and makes loans
4.
A 'bear market' is characterized by: —
A prolonged period of falling stock prices
5.
What is the Bretton Woods system, historically significant for international finance? —
A system of fixed exchange rates tied to gold
6.
Which of the following is a key function of a central bank? —
Issuing currency and managing monetary policy
7.
An increase in the reserve requirement ratio by a central bank typically leads to: —
A decrease in the money supply
8.
Fiat money is money that is: —
Declared by a government to be legal tender
9.
When a central bank reduces its policy interest rate, it generally aims to: —
Stimulate economic activity
10.
M2 typically includes M1 plus: —
Savings deposits and small-time deposits
11.
When a bank lends money, it creates a liability on its balance sheet known as: —
Loans
12.
Which of the following is an example of commodity money? —
Gold coins
13.
A stock market is a type of financial market where: —
Shares of publicly listed companies are bought and sold
14.
Monetary policy refers to actions undertaken by a central bank to manipulate: —
The money supply and interest rates
15.
What is an example of a tool used by central banks to implement monetary policy? —
Changing the reserve requirement ratio
16.
Which of the following is a measure to promote financial inclusion? —
Opening more bank branches in rural areas
17.
A financial institution that specializes in providing insurance against financial loss is known as an: —
Insurance company
18.
When a bank accepts deposits from the public, it is performing its function of: —
Mobilizing savings
19.
The 'repo rate' is the rate at which the central bank: —
Lends money to commercial banks against government securities
20.
What does 'financial inclusion' mean? —
Ensuring access to affordable financial products and services for all
21.
Which measure of money supply (M1, M2, M3) is considered the narrowest and most liquid? —
M1
22.
Which of the following is NOT a function of money? —
Source of inflation
23.
When money is used to measure the value of different goods and services, it is performing its function as a: —
Unit of account
24.
The ability of money to be used to make purchases in the future is known as its function as a: —
Store of value
25.
The process by which banks create new money when they make loans is known as: —
Money multiplication
26.
The difference between a bank's interest income from loans and its interest expense on deposits is called: —
Net interest margin
27.
A credit union is a type of financial institution that is: —
Owned by its members
28.
What is 'digital money' or 'e-money'? —
A digital representation of fiat currency held electronically
29.
Which of the following is a characteristic of a 'bull market' in financial markets? —
Prices are generally rising
30.
The primary role of a commercial bank is to: —
Act as an intermediary between savers and borrowers
31.
A central bank is an institution that: —
Regulates the money supply and oversees the banking system
32.
When a central bank engages in 'quantitative easing', it typically involves: —
Buying long-term government bonds and other securities
33.
When a central bank buys government securities from commercial banks, it aims to: —
Increase the money supply
34.
What is the term for the rate at which commercial banks borrow money from the central bank? —
Bank rate
35.
The 'bank rate' is typically higher than the 'repo rate' and is used for: —
Long-term lending to commercial banks
36.
A 'capital market' is where trading occurs for: —
Long-term financial instruments like stocks and bonds
37.
Which institution plays a crucial role in regulating financial institutions and markets to ensure stability? —
The Central Bank
38.
What is the reserve requirement ratio? —
The percentage of deposits banks must hold in reserve
39.
What is 'liquidity' in the context of a financial institution? —
The ease with which it can meet its short-term obligations
40.
What is the 'capital adequacy ratio' for a bank? —
The ratio of a bank's capital to its risk-weighted assets
41.
What is the role of an investment bank? —
To help companies raise capital by issuing stocks and bonds
42.
What is the function of the 'discount window' at a central bank? —
To lend money to eligible financial institutions
43.
What is the primary purpose of deposit insurance provided by governments? —
To protect depositors against bank failures
44.
What is the primary goal of prudential regulation in the banking sector? —
To ensure the safety and soundness of financial institutions
45.
What is the role of a financial intermediary? —
To connect savers and borrowers
46.
What is the main purpose of financial markets? —
To facilitate the buying and selling of financial assets
47.
What is the primary function of money as a medium of exchange? —
To facilitate the buying and selling of goods and services
48.
What is a 'money market' primarily concerned with? —
Trading of short-term debt instruments
49.
What is the primary function of a bond market? —
Facilitating the issuance and trading of debt securities
50.
What does the 'standard of deferred payment' function of money refer to? —
Using money to pay debts over time