banking, security market & insurance section 2 MCQ Questions & Answers Detailed Explanation

Answer: (c)

Answer: (c)

MPC has 6 members, not 12; and it’s headed by the RBI governor and not Finance Minister.

So statements 2 and 3 are wrong, hence by elimination, we reach answer (a) only 1 correct.

Answer: (c)

The one rupee note is issued by the Ministry of Finance and it bears the signature of the Finance Secretary, while other notes bear the signature of Governor RBI.

However, only RBI is the only source of legal tender money because the distribution of one rupee notes and coins and small coins all over the country is undertaken by the Reserve Bank as an agent of the Government.

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.

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.

Answer: (d)

Bank rate is the rate charged by the central bank for lending funds to commercial banks.