Mock Test For Scale-I to Scale-II
Created on 20th July 2025
Grade level: Higher Educationth grade
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21 Questions
Mock Test for Scale-I to Scale-II
Questions (21)
1. What is the primary function of a central bank?
To regulate the supply of money and interest rates
4 choice options
2. Which of the following is a common tool used by central banks to control inflation?
Setting interest rates
4 choice options
3. What does the term 'liquidity' refer to in banking?
The ease of converting assets into cash
4 choice options
4. What is the purpose of the FDIC?
To insure deposits in member banks
4 choice options
5. Which of the following best describes 'fractional reserve banking'?
Banks hold a fraction of deposits as reserves and lend out the rest
4 choice options
6. What is meant by 'monetary policy'?
The process by which a central bank manages money supply and interest rates
4 choice options
7. What is the term for a decrease in the general price level of goods and services?
Deflation
4 choice options
8. What is a 'bank run'?
When a large number of customers withdraw their deposits simultaneously
4 choice options
9. Which type of account typically pays the highest interest rate?
Certificate of Deposit (CD)
4 choice options
10. What does 'credit risk' refer to?
The risk of a borrower defaulting on a loan
4 choice options
11. How do banks typically make a profit?
By charging higher interest on loans than they pay on deposits
4 choice options
12. What is the role of the 'Basel Accords'?
To establish international banking regulations
4 choice options
13. What is an 'interest rate swap'?
A financial agreement to exchange interest rate cash flows
4 choice options
14. What does the term 'capital adequacy' mean for banks?
The amount of capital a bank holds to cover its risks
4 choice options
15. What is meant by 'systemic risk' in the banking sector?
The risk of collapse of an entire financial system or market
4 choice options
16. Which regulatory body oversees the banking industry in the United States?
The Federal Reserve
4 choice options
17. What is a 'credit default swap'?
A financial derivative that allows investors to 'swap' credit risk
4 choice options
18. How do banks affect the economy?
By providing loans and facilitating payments
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19. What is the 'prime rate'?
The interest rate that commercial banks offer to their most creditworthy customers
4 choice options
20. What is 'asset-backed security'?
A security backed by a pool of assets, such as mortgages
4 choice options
21. What is the primary goal of 'risk management' in banking?
To minimize potential losses
4 choice options