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

Answer: (c)

In banking, excess reserves are bank reserves in excess of the reserve requirement set by a central bank. They are reserves of cash more than the required amounts.

Holding excess reserves has an opportunity cost if higher risk-adjusted interest can be earned by putting the funds elsewhere; the advantage of holding some funds in excess reserves is that doing so may provide enhanced liquidity and therefore the more smooth operation of the payment system.

Answer: (c)

The limited advisory function accorded to the Public Service Commission and the continued stress on this aspect by the leaders of our freedom movement resulted in the setting up of a Federal Public Service Commission under the Government of India Act, 1935.

The Federal Public Service Commission became the Union Public Service Commission after Independence. The portfolio system in the Executive was introduced by the Indian constitution council act, 1861.

The separation of provincial budgets from the central budget was introduced by the Indian council's Act, 1919.

Answer: (a)

Capital Intensive Industry refers to that industry that requires a substantial amount of capital for the production of goods. In the Capital Intensive Industries, the proportion of capital involved is much higher than the proportion of labour.

This is because the industrial structure and industry type require high-value investments in capital assets. On the basis of this standard, the iron and steel industry can be termed as a capital intensive industry.

Answer: (c)

According to the Reserve Bank of India, cooperative marketing is a cooperative association of cultivators formed primarily for the purpose of helping the members to market their products more profitably than is possible through private trade. Under the system of co-operative marketing whole responsibility of marketing is taken up by the farmers themselves, organized on a co-operative basis.

The area of operation of marketing society is usually fixed with reference to local conditions - area based or commodity-based. The commodity-based societies related to grapes, oranges, bananas, pomegranates, etc. have wider jurisdiction covering the major areas growing each crop.

There are societies at the producer’s level and they federate at the state or national level to deal with bigger markets including foreign markets for the export of their produce.

Answer: (a)

Under Section 22 of the Reserve Bank of India Act, the Bank has the sole right to issue banknotes of all denominations. 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.

The one rupee note is issued by the Ministry of Finance and bears the signature of the secretary. The responsibility for coinage vests with the Government of India on the basis of the Coinage Act, 1906 as amended from time to time.

The designing and minting of coins in various denominations are also attended to by the Government of India.

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.