About this quiz
20 questions covering every section of the note.
This Lok Sewa practice set has 20 multiple-choice questions (Subject: Banking and Finance · For: Kharidar, Nayab Subba, Section Officer · Level: Easy). Take the quiz above first; after that, use the study list below to revise every question with its correct answer and a short explanation.
Study list: all 20 questions with answers and explanations
Who makes the monetary policy of Nepal?
- A) Ministry of Finance
- B) Nepal Rastra Bank ✔
- C) National Planning Commission
- D) Parliament
Why: Nepal Rastra Bank makes Nepal's monetary policy each year.
The main objective of monetary policy is:
- A) Price stability ✔
- B) Increasing tax
- C) Building roads
- D) Running elections
Why: The main objective of monetary policy is price stability, along with financial stability and growth.
A higher CRR will:
- A) Increase bank lending
- B) Reduce bank lending ✔
- C) Have no effect
- D) Lower inflation targets
Why: A higher CRR makes banks keep more cash with NRB, so they have less to lend.
When NRB buys government securities, it:
- A) Absorbs liquidity
- B) Injects liquidity ✔
- C) Raises CRR
- D) Stops lending
Why: When NRB buys government securities, it pays money into the system and injects liquidity.
Repo is used by NRB to:
- A) Inject liquidity ✔
- B) Absorb liquidity
- C) Collect tax
- D) Print stamps
Why: Through a repo, NRB lends to banks against securities, injecting liquidity.
Reverse repo is used to:
- A) Inject liquidity
- B) Absorb extra liquidity ✔
- C) Give subsidies
- D) Reduce tax
Why: Through a reverse repo, NRB borrows from banks, absorbing extra liquidity.
Directed lending to agriculture and energy is a:
- A) Quantitative tool
- B) Qualitative (selective) tool ✔
- C) Fiscal tool
- D) Tax tool
Why: Directed lending to priority sectors such as agriculture and energy is a qualitative (selective) tool.
Persuading banks through advice is called:
- A) Moral suasion ✔
- B) Open market operation
- C) Repo
- D) CRR
Why: Moral suasion means persuading banks through advice and requests rather than rules.
The interest rate corridor was introduced in:
- A) 2063/64 BS
- B) 2073/74 BS ✔
- C) 2080/81 BS
- D) 2058/59 BS
Why: NRB introduced the interest rate corridor in FY 2073/74.
The upper limit of the interest rate corridor is the:
- A) Deposit collection rate
- B) SLF rate ✔
- C) Saving rate
- D) Inflation rate
Why: The Standing Liquidity Facility (SLF) rate is the upper limit of the corridor.
The lower limit (floor) of the corridor is the:
- A) Deposit collection rate ✔
- B) SLF rate
- C) Bank rate
- D) Policy rate
Why: The deposit collection rate is the floor of the corridor.
The middle rate in the corridor is the:
- A) Policy rate ✔
- B) CRR
- C) SLR
- D) Tax rate
Why: The policy rate sits in the middle of the corridor.
To control high inflation, the central bank uses a(n):
- A) Expansionary policy
- B) Contractionary policy ✔
- C) Budget deficit
- D) Subsidy policy
Why: To control high inflation, the central bank uses a contractionary (tight) policy.
M1 (narrow money) includes:
- A) Currency + demand deposits ✔
- B) Only fixed deposits
- C) Gold reserves
- D) Foreign loans
Why: M1 (narrow money) is currency plus demand deposits.
M2 (broad money) equals:
- A) M1 + time deposits ✔
- B) M1 − currency
- C) Only cash
- D) Only loans
Why: M2 (broad money) is M1 plus time deposits.
Fiscal policy is made by:
- A) Ministry of Finance ✔
- B) Nepal Rastra Bank
- C) NEPSE
- D) SEBON
Why: Fiscal policy is made by the Ministry of Finance through the budget.
Taxes and public spending are tools of:
- A) Monetary policy
- B) Fiscal policy ✔
- C) Trade policy only
- D) Foreign policy
Why: Taxes and public spending are tools of fiscal policy.
SLR requires banks to keep a share of deposits in:
- A) Liquid assets such as government securities ✔
- B) Real estate
- C) Shares of companies
- D) Foreign currency only
Why: SLR requires banks to keep a share of deposits in liquid assets such as government securities.
NRB reviews its monetary policy:
- A) Every 10 years
- B) At mid-year (mid-term review) ✔
- C) Never
- D) Only during elections
Why: NRB reviews its monetary policy at mid-year in a mid-term review.
A higher policy rate generally makes bank loans:
- A) Cheaper
- B) Costlier ✔
- C) Free
- D) Unchanged always
Why: A higher policy rate makes borrowing costlier for banks, so bank loans become costlier.