introduction to indian economy section 7 MCQ Questions & Answers Detailed Explanation

Answer: (b)

It will remain the same, because banks do not increase the national income. So it remains the same immaterial whether banks are there or not.

Answer: (c)

When a government’s total expenditure exceeds the revenue that it generates (excluding money from borrowings).

Deficit differs from debt, which is an accumulation of yearly deficits. A fiscal deficit is regarded by some as a positive economic event.

Answer: (a)

In terms of Section 22 of the Reserve Bank of India Act, the RBI has been given the statutory function of note issue on a monopoly basis. The note issue in India was originally based upon the “Proportional Reserve System”. When it became difficult to maintain the re-serve proportionately, it was replaced by the “Minimum Reserve System “.

According to the RBI Amendment Act of 1957, the bank should now maintain a minimum reserve of Rs.200 crore worth of gold coins, gold bullion and foreign securities of which the value of gold coin and bullion should be not less than Rs.115 crore.

Answer: (d)

The income approach equates the total output of a nation to the total factor income received by residents or citizens of the nation.

The main types of factor income are:

1. Employee compensation (cost of fringe benefits, including unemployment, health, and retirement benefits);
2. Interest received net of interest paid;
3. Rental income (mainly for the use of real estate) net of expenses of landlords; and
4. Royalties paid for the use of intellectual property and extractable natural resources.

All remaining value-added generated by firms is called the residual or profit. If a firm has stockholders, they own the residual, some of which they receive as dividends.

Profit includes the income of the entrepreneur - the businessman who combines factor inputs to produce a good or service.

Answer: (d)

Statutory Liquidity Ratio refers to the amount that the commercial banks require to maintain in the form of gold or government approved securities before providing credit to the customers.

An increase in SLR practically restricts lending, thus controlling credit in the country. In India, the RBI can increase the Statutory Liquidity Ratio to contain inflation, suck liquidity in the market, to tighten the measure to safeguard the customers’ money.

Answer: (d)

A scheduled bank, in India, refers to a bank that is listed in the 2ndSchedule of the Reserve Bank of India Act, 1934.

Banks not under this Schedule are called non-scheduled banks. Scheduled banks are usually private, foreign, and nationalized banks operating in India.