money supply, banking & financial institutions section 4 MCQ Questions & Answers Detailed Explanation

Answer: (b)

The pegged exchange rate means a country fixes its exchange rate with another country currency or a basket of currencies and when required changes it accordingly

Suppose Nominal Exchange Rate is $1 = Rs.60 (Nominal exchange rate means how many Rs. can be purchased in USD 1)

For example, suppose - Burger Price - India : Rs. 30, US : $1,

In this case, US will import the burgers from India as in $1 they will get Rs. 60 and in Rs. 60 they will get 2 burgers from India. So, India will export burgers to US.

But if due to inflation the burger price in India becomes Rs. 60 then exports from India will stop. So, inflation in the country makes exports less competitive.

Hence, (i) statement is true. But when the price of burgers in India reaches Rs. 60 and RBI devalue the exchange rate to $1 = Rs. 120 then again exports from India will start.

Because now foreigners will get Rs. 120 in $1 and in Rs. 120 they will again get 2 burgers from India.

So (ii) statement is also true.

Answer: (c)

The resolution plan finalized by the Committee of Creditors must be approved by the NCLT (NCLT is the final approving authority). Supreme Court on 15th Nov 2019 ruled that the corporate insolvency resolution process can be extended beyond 330 days in case of exceptional cases.

But ordinarily, the time taken in relation to the resolution process must be completed within the outer limit of 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings.

Extension of time should be granted by NCLT/NCLAT, only in case of exceptional cases, if parties are able to prove there is very little time left in the resolution process and the delay has been caused by ‘tardy’ legal proceedings.

Timelines in IBC,

• In a normal case, the resolution process should be completed in 180 days
• In complex cases, the resolution process should be completed in 270 days
• Including litigation, the resolution process should be completed in 330 days
• In exceptional cases (tardy legal proceedings), the resolution process may go beyond 330 days

Answer: (c)

Answer: (a)

Answer: (c)

There are four commodity exchanges working in the country. They are

1. NMCE (National Multi Commodity Exchange) - the oldest commodity exchange in the country which became operational in 2002,
2. MCX (Multi Commodity Exchange),
3. NCDEX (National Commodity and Derivatives Exchange) and
4. ICEX (Indian Commodity Exchange).

Answer: (a)

Advance tax payment means paying a part of the yearly taxes in advance to the government. This reduces liquidity in the economy because the money moves from public to government. (the logic is money with the government is not part of the money supply in the economy)

In the case of GST, the government credits/gives back the taxes paid on inputs, to the suppliers which increase liquidity in the economy. Front loading of government expenditure means the government is spending its yearly targeted expenditure in the starting months rather than in the year-end. This increases liquidity in the economy.

Recapitalization of public sector banks means the government is putting money in public sector banks which increases the lending capacity of the banks resulting in an increase in money supply and liquidity.