banking, security market & insurance section 2 MCQ Questions & Answers Detailed Explanation
MOST IMPORTANT indian economy mcq - 5 EXERCISES
The following question based on Banking, Security Market & Insurance topic of indian economy mcq
(a) Rate of Profit of banking institution
(b) Interest rate charged by Scheduled Banks
(c) Interest rate charged by money lenders
(d) Official rate of interest charged by Central Bank
The correct answers to the above question in:
Answer: (d)
Bank rate is the rate charged by the central bank for lending funds to commercial banks.
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Question : 1
Which of the following is not true when the interest rate in the economy goes up?
a) Cost of production increases
b) Lending decreases
c) Saving increases
d) Return on capital increases
Answer »Answer: (d)
The rise in interest rates results in an increased cost of borrowing so lending decreases because businesses do not borrow at a high cost.
Moreover, it results in an increase in the cost of production as the cost for all suppliers of raw material increases due to an increase in their borrowing cost. For individuals, the savings increase as they start saving in lieu of higher return as interest.
Higher rates of interest result in a decrease in return on capital as the cost of investment in capital increases.
Question : 2
Which of the following does not grant any tax rebate?
a) National Saving Scheme
b) Indira Vikas Patra
c) National Saving Certificate
d) Public Provident Fund
Answer »Answer: (b)
Indira Vikas Patra was a small scale deposit scheme operated by the post offices all over the country to encourage the idea of investment in the minds of the lower-middle class people. NSC, National Saving Scheme and PPF all grant tax rebate.
Question : 3
When the RBI wants to inject liquidity into the economy, it may adopt the following :
- Buy the government securities from the banks.
- Enter into reverse repo operations
- Raise cash Reserve Ratio
- Reduce SLR.
a) 1, 2 and 4 only
b) 1 and 4 only
c) 1 only
d) 1, 2, 3 and 4
Answer »Answer: (b)
By buying the government securities from the banks and reducing SLR may inject money into the system.
However, Raising the cash Reserve Ratio may take away liquidity from the market as the banks will have to deposit more money with the RBI and similarly entering the reverse repo operations may also take away liquidity from the market.
Question : 4
Who is the new Chairman of Life Insurance Corporation of India?
a) Thomas Matthew
b) D.K. Malhotra
c) S.K. Roy
d) V.K. Sharma
Answer »Answer: (d)
V.K. Sharma is the new Chairman of Life Insurance Corporation of India.
LIC : Largest insurance company in India,
HQ : Mumbai, India
Question : 5
Note-issuing department of RBI should always possess the minimum gold stock of worth—
a) Rs. 200 crore
b) Rs. 115 crore
c) Rs. 85 crore
d) None of these
Answer »Answer: (b)
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banking, security market & insurance section 1
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banking, security market & insurance section 4
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