money supply, banking & financial institutions section 5 MCQ Questions & Answers Detailed Explanation

Answer: (c)

Deflation is defined as a fall in the general price level of goods and services. It is a negative rate of inflation. It means the value of money increases rather than decreases.

Answer: (d)

Answer: (d)

If the supply is less than the demand, the price will increase. Inflation, the persistent increase in the average price level, can be caused by an increase in aggregate demand or a decrease in aggregate supply.

This suggests two basics sources, causes, or types of inflation—demand-pull inflation and cost-push inflation.

In general, prices increase as a result of market shortages, which occur when quantity demanded exceeds quantity supplied. Market shortages can be created by either increase in demand or decreases in supply.

Translating this to the macroeconomy suggests that inflation occurs when aggregate demand exceeds aggregate supply.

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.

Answer: (c)

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.