lesson 2

Question 1

Instruments of Monetary Policy

Answer 1

quantitative (general or indirect) and qualitative (selective or direct)

Question 2

is the minimum lending rate of the central bank at which it rediscounts first-class bills of exchange and
government securities held by commercial banks.

Answer 2

bank rate

Question 3

is a written order used primarily in international trade that binds one party to pay a fixed sum of
money to another party on demand or at a predetermined date.

Answer 3

Bill of exchange

Question 4

refer to the sale and purchase of securities in the money market by the central bank.

Answer 4

Open market operations

Question 5

refers to trading in very short-term debt investments.

Answer 5

money market

Question 6

is one of the pillars of the global financial system.

Answer 6

money market

Question 7

are used to influence specific types of credit for particular purposes.

Answer 7

Selective credit controls

Question 8

is used as an important instrument to control inflation.

Answer 8

bank rate policy

Question 9

performs the function as “lender of the last resort”

Answer 9

central bank

Question 10

also called as the Cash Reserve Ratio (CRR) is a certain
proportion of total demand and time deposits that the commercial banks are required to maintain in the form of cash
reserves with the central bank.

Answer 10

Variable Reserve Ratio:

Question 11

is a bank account from which deposited funds can be withdrawn at any time,
without advance notice.

Answer 11

Demand deposit account

Question 13

have the shortest range of maturities of all government bonds.

Answer 13

T-Bills

Question 14

represent the middle range of maturities in the Treasury family, with maturity terms of two, three, five,
seven, and 10 years

Answer 14

T-Notes

Question 15

Commonly referred to in the investment community as the “long bond,”

Answer 15

T-Bonds