introduction to indian economy section 4 MCQ Questions & Answers Detailed Explanation

Answer: (d)

Interest rates are the main determinant of investment on a macroeconomic scale. The current thought is that if interest rates increase across the board, then investment decreases, causing a fall in national income.

However, the Austrian School of Economics sees higher rates as leading to greater investment in order to earn the interest to pay the depositors.

Higher rates encourage more saving and thus more investment and thus more jobs to increase production to increase profits. Higher rates also discourage economically unproductive lending such as consumer credit and mortgage lending.

Answer: (d)

ICICI (Industrial Credit and Investment Corporation of India) Bank is an Indian multinational banking and financial services company headquartered in Mumbai, Maharashtra.

It is the largest private sector bank and overall the second largest bank in India after State Bank of India.

Answer: (d)

The Reserve Bank of India is the main monetary authority of the country and besides that, the central bank acts as the bank of the national and state governments.

It formulates, implements and monitors the monetary policy as well as has to ensure an adequate flow of credit to productive sectors.

Objectives are maintaining price stability and ensuring adequate flow of credit to productive sectors.

Answer: (c)

The process of curing inflation by reducing money supply is called disinflation. Disinflation is a decrease in the rate of inflation – a slowdown in the rate of increase of the price level of goods and services in GDP. Disinflation occurs when the increase in the “consumer price level” slows down from the previous period when the prices were rising.

Answer: (b)

The interest paid on bonds is known as ‘coupon’ or ‘coupon rate’. Bonds and debentures both are the instruments of raising long-term capital but while the former is supported by collateral in the former is supported by collateral in the form of immovable property, the latter are not.

Answer: (a)

NABARD stands for National Bank for Agriculture and Rural Development. It is an apex development bank in India having headquarters based in Mumbai (Maharashtra).

It was established on 12 July 1982 and accredited with matters credit for agriculture and other economic activities in rural areas in India.