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

Answer: (b)

As per section 24 of RBI Act 1934, “Central Government, on the recommendation of Central Board of Directors of RBI, has the authority to specify the denomination of the new currency note to be issued in the country.”

Answer: (a)

Answer: (b)

A line of credit is a preset amount of money that a bank has agreed to lend to a company/individual. The company can draw from the line of credit when it needs up to the maximum amount. The company will pay interest only on the amount used.

Answer: (b)

Answer: (b)

Devaluation makes import expensive and discourages it, while the export of a country that devalues becomes cheaper and thereby induces trade partners to import more goods from her.

Nations that produce industrial goods on a large scale stand to benefit from devaluation.

Answer: (a)

• Creditor means the person who has given money to someone
• Debtor means who has taken money from someone
• Depositors mean those who have deposited money in banks or financial institutions
• Bondholders mean a person who is holding bonds

When a person holds a physical asset whose price is denoted in Rupees then he benefits from price increase or inflation.

But a person who holds financial assets (like Rs. 100 note) or any financial instrument which guarantees fix return of cash payments in future then he loses from the price rise. This is because the purchasing power of the rupee (the fixed money which he is supposed to get) decreases due to inflation.

Hence, in case of inflation, depositors, creditors and bondholders will lose. So, only (ii) statement is true