money supply, banking & financial institutions section 2 MCQ Questions & Answers Detailed Explanation

Question : 1

It is said that, in order to control inflation, foreign inflow needs to be sterlised. Sterlisation here refers to:

a) ensuring that black money is accounted.

b) ensuring that counterfeit currency does not enter circulation

c) compliance with import-export regulations

d) withdrawing equivalent local currency to maintain a desirable rate of exchange

Question : 2

Monetary policy is implemented by ..... in India.

a) The Parliament

b) Reserve Bank of India

c) Planning Commission

d) The Ministry of Finance

Question : 3

A currency having a falling exchange rate due to continuing balance of payments deficit is called a

a) Scarce currency

b) Surplus currency

c) Soft currency

d) Hard currency

Question : 4

A rapid increase in the rate of inflation is sometimes attributed to the “base effect”. What is “base effect”?

a) It is the impact of drastic deficiency in supply due to failure of crops

b) It is the impact of the price levels of previous year on the calculation of inflation rate

c) It is the impact of the surge in demand due to rapid economic growth

d) None of the statements (a), (b) and (c) given above is correct in this context

Question : 5

In India, rural incomes are generally lower than the urban incomes. Which of the following reasons account for this?

1. A large number of farmers are illiterate and know little about scientific agriculture.
2. Prices of primary products are lower than those of manufactured products.
3. Investments in agriculture has been low when compared to investment in industry.

a) 1 and 2

b) 2 and 3

c) 1 and 3

d) 1, 2 and 3

Question : 6

Capitalism is based upon “Laissez-faire system”. What is “Laissez-faire system”?

a) No governmental intervention

b) Role of market forces is minimum

c) Maximum governmental intervention

d) Limited government Intervention