money supply, banking & financial institutions section 5 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

Questions : Consider the following statements regarding Reserve Bank of India.
  1. It is a banks to the Central Government.
  2. It formulates and administer monetary policy.
  3. It acts as an agent of government in respect of India.
  4. It handles the borrowing programme of Government of India.
Which of these statements are correct?

(a) 2, 3 and 4

(b) 3 and 4

(c) 1, 2, 3 and 4

(d) 1 and 2

The correct answers to the above question in:

Answer: (c)

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Question : 1

The Cash Reserve Ratio is a tool of :

a) Agricultural policy

b) Fiscal policy

c) Monetary policy

d) Tax policy

Answer: (c)

Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank.

CRR is a crucial monetary policy tool and is used for controlling the money supply in an economy.

Question : 2

In India ‘Money and Credit’ is controlled by the

a) Industrial Development Bank of India

b) State Bank of India

c) Reserve Bank of India

d) Central Bank of India

Answer: (c)

Question : 3

Match the following.

List I List II
(Goods) (Example)
i. Public goods a. Primary education
ii. Merit goods b. National defence
iii. Non-merit goods c. Pollution
Codes: i ii iii

a) i-b, ii-a, iii-c

b) i-a, ii-b, iii-c

c) i-c, ii-b, iii-a

d) i-a, ii-c, iii-b

Answer: (a)

Public goods include,

  1. national defence,
  2. police,
  3. general administration,
  4. Merit goods include primary education,
  5. immunisation,
  6. public health programme,

Non-merit goods include pollution caused by automobile emissions.

Question : 4

”Smart Money” term is used for

a) eBanking

b) Cash with Public

c) Credit Card

d) Internet Banking

Answer: (c)

Credit cards are sometimes considered as smart money since they enable transactions without the need for physical cash and that, too, is a convenient manner.

It is plastic money that is used to pay for products and services at over 20 million locations around the world. In purely economic terms, Smart Money refers to investments made by people experienced in matters of finance.

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