introduction to indian economy section 2 MCQ Questions & Answers Detailed Explanation

Answer: (c)

A country devalues its currency in order to promote exports. A key effect of devaluation is that it makes the domestic currency cheaper relative to other currencies. There are two implications of devaluation.

First, devaluation makes the country’s exports relatively less expensive for foreigners. Second, the devaluation makes foreign products relatively more expensive for domestic consumers, thus discouraging imports.

This may help to increase the country’s exports and decrease imports, and may therefore help to reduce the current account deficit. One typical example is Thailand in the 1998 Asian financial crisis.

The baht was pegged at 25 to the US dollar before the crisis. During the crisis, the slowdown in export growth caused Thailand to abandon the dollar peg and devalue its currency in order to promote exports.

Answer: (b)

The sum of a nation’s gross domestic product (GDP) plus net income received from overseas. Gross national income (GNI) is defined as the sum of value added by all producers who are residents in a nation, plus any product taxes (minus subsidies) not included in output, plus income received from abroad such as employee compensation and property income.

Answer: (d)

The Mumbai Stock Exchange, also known as Bombay Stock Exchange (BSE), was established in 1875. It claims to be Asia’s first stock exchange and the world’s fastest stock exchange, with a median trade speed of 6 microseconds.

Answer: (d)

Banks are required to invest a portion of their statutory liquidity ratio besides CRR.

Statutory liquidity ratio (SLR) is the Indian government term for reserve requirement that the commercial banks in India require to maintain in the form of gold, cash or government-approved securities before providing credit to the customers.

SLR is determined and maintained by the Reserve Bank of India in order to control the expansion of bank credit.

Answer: (d)

Infant mortality rate indicates the number of infant death under one years of age per 1000 live birth under one year of age.

Answer: (b)

The effect of a government surplus upon the equilibrium level of NNP (Net National Product) is substantially the same as an increase in consumption.