introduction to indian economy section 9 MCQ Questions & Answers Detailed Explanation

Answer: (d)

Depreciation is equal to GNP–NNP (Gross national products–Net national products) Depreciation is also known as consumption of fixed capital. It is the wear and tear to the physical assets. It measures the amount of GNP that must be spent on new capital goods to maintain the existing physical capital stock.

Answer: (a)

A universal bank participates in many kinds of banking activities and is both a commercial bank and an investment bank. Universal banks may offer credit, loans, deposits, asset management, investment advisory, payment processing, securities transactions, underwriting and financial analysis.

Fiscal 2002 marked a turning point in the history of the ICICI group, as it witnessed the culmination of the ICICI group’s strategy of becoming an integrated financial services provider – the merger of ICICI Limited (ICICI) with ICICI Bank. The merger was a path-breaking initiative, which created India’s first “universal bank” and the second-largest bank in the country.

As part of the reorganization, two of ICICI’s wholly-owned retail finance subsidiaries viz. ICICI Personal Financial Services Limited (ICICI PFS) and ICICI Capital Services Limited (ICICI Capital), were also merged with ICICI Bank, in order to integrate and consolidate the retail business.

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.

Hereby approved securities we mean, bonds and shares of different companies. The statutory Liquidity Ratio is determined and maintained by the Reserve Bank of India in order to control the expansion of bank credit.

Statutory liquidity ratio is the number of liquid assets such as precious metals (Gold) or other approved securities, that a financial institution must maintain as reserves other than the cash.

In a growing economy, banks would like to invest in the stock market, not in Government Securities or Gold as the latter would yield fewer returns. One more reason is long term Government Securities (or any bond) are sensitive to interest rate changes. But in an emerging economy interest rate change is a common activity.

Answer: (d)

Deflation may be caused by a combination of the supply and demand for goods and the supply and demand for money, specifically the supply of money going down and the supply of goods going up.

Answer: (d)

The major aim of devaluation is to encourage exports. Devaluation is a deliberate downward adjustment to the value of a country’s currency, relative to another currency, group of currencies. One reason a country may devaluate its currency is to combat trade imbalances.

Devaluation causes a country’s exports to become less expensive, making them more competitive on the global market. This in turn means that imports are more expensive, making domestic consumers less likely to purchase them.

Answer: (b)