money supply, banking & financial institutions section 4 MCQ Questions & Answers Detailed Explanation
MOST IMPORTANT indian economy mcq - 12 EXERCISES
-
500+ Banking & Money Supply GK MCQ Quiz PDF For IBPS Exam »
-
Top 500+ Indian Financial System GK MCQ Live Quiz For SSC »
-
Top 500+ Money Supply & Banking Functions GK MCQ Quiz PDF »
-
New Banking & Financial Institutions GK MCQ Quiz For RRB »
-
Top 500+ Money Supply Methods & Concepts GK MCQ For UPSC »
-
Banking & Financial Institutions Features GK MCQ Quiz PDF »
-
New 500+ Money Supply Concepts Types Formulas GK MCQ Quiz »
-
499+ Indian Monetary Aggregates & Money Supply GK MCQ PDF »
-
Top 500+ Money & Banking Questions And Answers Test PDF »
-
New Banking & Money Supply Questions And Answers Test PDF »
-
Top 500+ Money Supply Trends & Developments MCQ For IBPS »
-
Top 500+ Banking & Financial Institutions GK MCQ Test PDF »
The following question based on Money Supply, Banking and Financial Institutions topic of indian economy mcq
- The repo rate is the rate at which other banks borrow from the Reserve Bank of India.
- A value of 1 for Gini Coefficient in a country implies that there is perfectly equal income for everyone in its population.
(a) 2 only
(b) 1 only
(c) Both 1 and 2
(d) Neither 1 nor 2
The correct answers to the above question in:
Answer: (b)
Repo Rate is the rate at which commercial banks borrow funds from RBI. A reduction in the repo rate will help banks to get money from the central bank at a cheaper rate. When the repo rate increases borrowing from RBI becomes more expensive.
A value of (0) for the Gini Coefficient in a country implies that there is perfect equality in the system. If the value is 1 then there is complete inequality in the country.
Practice Money Supply, Banking and Financial Institutions (money supply, banking & financial institutions section 4) Online Quiz
Discuss Form
Read more money and supply banking financial institutions Based Indian Economy Questions and Answers
Question : 1
Which of the following statements are true regarding the “Liberalized Remittance Scheme” (LRS)?
- It is applicable for Individuals only and not companies
- It is applicable for both current and capital account
- Foreign exchange trading is not permitted in this scheme
a) (i) & (iii) only
b) (ii) & (iii) only
c) (i) only
d) All of the above
Answer »Answer: (d)
In India, any money you send overseas is subject to controls, as the government is wary of excessive outflows of foreign exchange draining its reserves and destabilising the rupee. But there has been an effort to gradually liberalise these controls.
The window that was opened up in 2004 for individuals to remit/send money across the border, without seeking specific approvals, was called the Liberalised Remittance Scheme (LRS).
Under LRS, all resident individuals (in India) can freely remit/send $250,000 overseas every financial year for a permissible set of current or capital account transactions.
Remittances are permitted for overseas education, travel, medical treatment and purchase of shares and property, apart from maintenance of relatives living abroad, gifting and donations. Individuals can also open, maintain and hold foreign currency accounts with overseas banks for carrying out transactions.
(Now anyone can say that “Rupee is fully convertible at current account” then what is this limit of $2,50,000? See, under this scheme, you can freely send the money abroad without specific government approvals, that is why the name is liberalized. But if you want to send more under current account then it may be possible but you may have to take specific approval of government which is not under this scheme)
However, the rules do not allow trading in “foreign exchange” (for example Dollar and Pound trading). Sending money to certain countries and entities is also barred. Under LRS, people can’t send money to countries identified as 'non-cooperative' by the Financial Action Task Force. Remittances are also prohibited to entities identified as posing terrorist risks.
The LRS represents India’s baby steps towards dismantling controls on foreign exchange movements in and out of the country. It has allowed large numbers of Indians to study abroad and diversify their portfolios from purely desi stocks and property.
Ideally speaking, capital controls in any form have no place in a liberalised economy. But for India, which is heavily dependent on imports of critical goods and perpetually spends more foreign exchange than it earns, it is difficult to free up remittances because of the havoc this can wreak on exchange rates.
The LRS gives you the freedom to put your money to work anywhere in the world. Until India is ready to free all capital controls, the LRS remains the most viable way for individuals to legally remit money overseas.
Question : 2
Devaluation of currency leads to
a) expansion of import substitution
b) All of the above
c) expansion of export trade
d) contraction of import trade
Answer »Answer: (b)
Devaluation in modern monetary policy is a reduction in the value of a currency with respect to those goods, services or other monetary units with which that currency can be exchanged.
There are two implications for currency devaluation. First, devaluation makes a country’s exports relatively less expensive for foreigners and second, it makes foreign products relatively more expensive for domestic consumers, discouraging imports.
As a result, this may help to reduce a country’s trade deficit. Import substitution means the promotion of export to replace imports. It is also a fallout of devaluation.
Question : 3
The state of deflation appears in the economy due to various reasons:
- When the Government withdraws money from circulation.
- When Government imposes heavy direct taxes or takes heavy loans from the public
- When the Central Bank buys the securities in the open market
a) 2 and 3
b) 1 and 2
c) 1 and 3
d) 1, 2, 3
Answer »Answer: (b)
The reasons for deflation in the economy are:
- When the Government withdraws money from circulation.
- When Government imposes heavy direct taxes or takes heavy loans from the public (voluntary or compulsory or both).
- When the Central Bank sells the securities in the open market (which reduces the quantity of money in circulation).
- When Central Bank controls the credit money and adopts various measures such as an increase in CRR, credit rationing and direct action.
- When the Central Bank increases the Bank rate (which curtails the quantity of credit in the economy).
- When a state of over-production (excess supply over demand) takes place.
Question : 4
Which one of the following is not a function of the central bank in an economy ?
a) Controlling government spending
b) Acting as a banker’s bank
c) Dealing with foreign exchange
d) Controlling monetary policy
Answer »Answer: (a)
A central bank, reserve bank, or monetary authority is a public institution that manages a state’s currency, money supply, and interest rates. Central banks also usually oversee the commercial banking system of their respective countries.
In contrast to a commercial bank, a central bank possesses a monopoly on increasing the nation’s monetary base, and usually also prints the national currency, which usually serves as the nation’s legal tender.
The primary function of a central bank is to manage the nation’s money supply (monetary policy), through active duties such as managing interest rates, setting the reserve requirement, and acting as a lender of last resort to the banking sector during times of bank insolvency or financial crisis.
Central banks usually also have supervisory powers, intended to prevent bank runs and to reduce the risk that commercial banks and other financial institutions engage in reckless or fraudulent behaviour.
Question : 5
An outward shift in the demand for money, other things being equal should lead to:
a) A lower interest rate but the same quantity of money
b) A higher quantity of money but lower interest rates
c) A higher interest rate but the same quantity of money
d) A higher quantity of money but the same interest rate
Answer »Answer: (c)
An outward shift in the demand for money, other things being equal should lead to a higher interest rate but the same quantity of money. The supply will not increase but with more demand the price (the interest rate) should increase.
Question : 6
What does venture capital mean?
a) A short-term capital provided to industries
b) Funds provided to industries at times of incurring losses
c) A long-term start-up capital provided to new entrepreneurs
d) Funds provided for replacement and renovation of industries
Answer »Answer: (c)
Venture capital (VC) is a long term financial capital provided to early-stage, high-potential, start up companies or new companies.
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
money supply, banking & financial institutions section 6
money supply, banking & financial institutions section 7
money supply, banking & financial institutions section 8
money supply, banking & financial institutions section 9
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
Verbal Reasoning
Question & Answer Quiz
Non Verbal Reasoning
Question & Answer Quiz
Quantitative Aptitude
Question & Answer Quiz
Computer MCQ
Question & Answer Quiz
General English
Question & Answer Quiz
History GK
Question & Answer Quiz
Polity GK
Question & Answer Quiz
Geography GK
Question & Answer Quiz
Economy GK
Question & Answer Quiz
General Awareness GK
Question & Answer Quiz
Recently Added Subject & Categories For All Competitive Exams
New Cloze Test Questions and Answers PDF - IBPS Clerk 2024
The most important Cloze Test questions with detailed answers for upcoming IBPS Clerk prelims 2024. Latest English verbal ability practice MCQs, PDF
Continue Reading »
Mensuration Aptitude Practice Mcq Questions IBPS Clerk 2024
Most Important Practice Mensuration aptitude multiple choice questions, answers with detailed solutions, PDF beginner to advanced for IBPS Clerk Prelims 2024
Continue Reading »
Top Clock Aptitude Questions and Answers PDF IBPS Clerk 2024
Recent Important IBPS Clerk Prelims 2024 Aptitude Clock MCQ Questions and answers with easy and logical explanation, PDF. Topic wise Free online practice test
Continue Reading »
New Time and Distance Aptitude MCQ PDF for IBPS Clerk 2024
Latest Time and Distance multiple choice questions and answers with solution PDF for IBPS Clerk Prelims 2024. Practice Speed Aptitude based Objective Mcq
Continue Reading »