money supply, banking & financial institutions section 4 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
- The teaser loans are considered to be an aspect of sub-prime lending and banks may be exposed to the risk of defaulters in future.
- In India, the teaser loans are mostly given to inexperienced entrepreneurs to set up manufacturing or export units.
(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)
The statement (1) is correct because it includes the definition of teaser loans but the statement (2) is not correct, because in India teaser loan is provided to the home buyers not for setting up manufacturing or export units.
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Read more money and supply banking financial institutions Based Indian Economy Questions and Answers
Question : 1
Devaluation of currency means
a) permitting a currency to seek its worth in the international market
b) None of the above
c) fixing the value of currency with the help of IMF and WB
d) reduction in the value of the currency vis-a-vis major internationally traded currencies
Answer »Answer: (d)
Question : 2
Who benefits the most during the inflationary period ?
a) entrepreneurs
b) government servants
c) corporate servants
d) creditors
Answer »Answer: (a)
Inflation has the effect of redistributing income because prices of all factors do not decline in the same proportion.
Entrepreneurs stand to gain more than wage earners or fixed income groups.
Speculators, hoarders, black marketers and smugglers gain on account of windfall profits.
Question : 3
Which of the following statements will be true if the inflation in the economy is increasing?
- Bond price will decrease
- Bondholders will loose
- The yield on bonds will increase
a) (i), & (ii) only
b) (iii) only
c) (i) only
d) All of the above
Answer »Answer: (d)
A bond (debt paper) holder is expected to get a fixed interest regularly and principal at maturity.
But if the inflation in the economy starts increasing the price of the bond decreases (because now the actual value of the principal and interest which the bondholder will get will be of less value) and bondholders lose.
When the price of the bond decreases in the market, the person who will purchase the bond will have to pay less price and hence he will get more return/yield.
(The interest rate on the bond remains fixed but its price fluctuates in the market and hence the return also fluctuates.
If the market price of the bond is low, then the return/yield on the bond will be high.
This is because the person who will purchase the bond will have to pay less price to get the same bond).
For a detailed understanding, you can refer to the book on Indian Economy by Vivek Singh.
Question : 4
NABARD provides refinance to which of the following types of financial institutions:
- Commercial Banks
- Regional Rural Banks
- State Cooperative Banks & Land Development Banks
- Non-Banking Financial Companies
a) (ii) & (iii) only
b) (i), (ii) & (iii) only
c) (ii) only
d) All of the above
Answer »Answer: (d)
NABARD does not give direct loans to individuals but it gives loans to
- Commercial Banks,
- Regional Rural Banks (RRBs),
- State Cooperative Banks & Land Development Banks and
- Non-Banking Financial Companies (NBFCs) for further lending (refinance) to the agriculture and rural sectors.
Question : 5
What are the functions of RBI?
- Issue of notes
- Banker to the government
- Controller of debit
- Custodian of foreign reserves
a) 2 only
b) 1 only
c) 3 only
d) 4 only
Answer »Answer: (c)
The functions of RBI are
- Issue of Notes,
- Banker to the Government,
- Banker’s Bank,
- Controller of Credit,
- Custodian of Foreign Reserves.
Question : 6
Which one of the following is not an instrument of selective credit control in India?
a) Rationing of credit
b) Variable cost reserve ratios
c) Margin requirements
d) Regulation of consumer credit
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
money supply, banking & financial institutions section 6
money supply, banking & financial institutions section 7
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money supply, banking & financial institutions section 10
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money supply, banking & financial institutions section 12
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