money supply, banking & financial institutions section 2 MCQ Questions & Answers Detailed Explanation
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The following question based on Money Supply, Banking and Financial Institutions topic of indian economy mcq
- Reserve Bank of India
- Portfolio Investors
- Financial Institution
- Individuals
(a) (i) & (iii) only
(b) (iii) only
(c) (i) only
(d) All of the above
The correct answers to the above question in:
Answer: (d)
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Question : 1
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
Answer »Answer: (a)
Question : 2
Consider the following steps:
- Banking Department gets currency from the Issue Department
- Government puts the currency in circulation
- Central Government incurs a deficit in its Budget
- Government Sells Treasury Bills to Banking Department of RBI
a) 2 3 4 1
b) 1 2 3 4
c) 3 4 1 2
d) 4 3 2 1
Answer »Answer: (c)
Question : 3
What does ECS in banking transactions stand for ?
a) Exchange Clearing Standard
b) lectronic Clearing Service
c) Excess Credit Supervisor
d) Extra Cash Status
Answer »Answer: (b)
Electronic Clearing Service is a mode of electronic funds transfers from one bank account to another bank account using the services of a Clearing House. This is normally for bulk transfers from one account to many accounts or vice-versa.
This can be used both for making payments like distribution of dividend, interest, salary, pension, etc. by institutions or for collection of amounts for purposes such as payments to utility companies like telephone, electricity, or charges such as house tax, water tax, etc or for loan instalments of financial institutions/banks or regular investments of persons.
Question : 4
Consider the following actions which the government can take
- Devaluing the domestic currency.
- Reduction in the export subsidy.
- 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
Answer »Answer: (b)
Question : 5
Which of the following statements are true regarding India’s present exchange rate system:
- The rupee-dollar rate depends on market forces of demand & supply
- RBI regulates the Rupee dollar rate
- RBI intervenes in the forex market
- RBI regulates the forex market
a) (i) & (iii) only
b) (i), (iii) & (iv) only
c) (i) only
d) (ii) & (iii)
Answer »Answer: (b)
The rate of rupee-dollar is determined in the forex market based on market forces of demand and supply. When the rupee becomes highly volatile, then RBI intervenes in the forex market, to contain the volatility.
But RBI does not regulate or fix the rupee-dollar rate. This is called ‘Managed Float’ or ‘Dirt Float’.
RBI regulates the Forex Market, Money Market and Govt. securities Market.
Question : 6
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
Answer »Answer: (b)
GET Money Supply, Banking and Financial Institutions PRACTICE TEST EXERCISES
money supply, banking & financial institutions section 1
money supply, banking & financial institutions section 2
money supply, banking & financial institutions section 3
money supply, banking & financial institutions section 4
money supply, banking & financial institutions section 5
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money supply, banking & financial institutions section 7
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money supply, banking & financial institutions section 10
money supply, banking & financial institutions section 11
money supply, banking & financial institutions section 12
Money Supply, Banking and Financial Institutions Shortcuts and Techniques with Examples
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