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

Question : 1

Consider the following actions which the government can take

1. Devaluing the domestic currency.
2. Reduction in the export subsidy.
3. Adopting suitable policies which attract greater FDI and more funds from FIIS.

a) 2 and 3

b) 1 and 3

c) Only 3

d) 1 and 2

Question : 2

Which of the following investors/ agencies can purchase government of India securities/bonds?

1. Reserve Bank of India
2. Portfolio Investors
3. Financial Institution
4. Individuals

a) (i) & (iii) only

b) (iii) only

c) (i) only

d) All of the above

Question : 3

Debentures and Equity differ in?

a) Debentures are bonds confirming that money has been borrowed; equity is a shareholder’s voting rights in proportion to his shareholding

b) Equity shares have greater risk compared to debentures which have fixed interest on the amount paid.

c) An equity shareholder cannot withdraw his investment but debenture holder can withdraw his money.

d) Both have the right to vote irrespective of the size of their holdings. Debentures are of lower value than equity

Question : 4

Which one of the following statements is not correct?

a) RBI is the banker of the Central and State Government

b) RBI was established in 1949

c) RBI is the custodian of the country’s Foreign Exchange Reserve

d) RBI is the Central Bank of the country

Question : 5

Which of the following will be the impact of rupee depreciation?

1. Exports will become more competitive
2. Exporters will fetch more dollars for the same amount of goods exported
3. Demand for domestic goods and services will increase

a) (ii) only

b) (i) & (iii) only

c) (i) only

d) All of the above

Question : 6

In a period of inflation and price rise the supply of money remains

a) decreases

b) increases or decreases proportionately.

c) the same

d) increases