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

Answer: (b)

Answer: (d)

Scheduled Commercial banks are mandated to give a portion (40%) of their total credit to the priority sectors. Priority sector guidelines do not lay down any preferential rate of interest for priority sector loans.

Typically, these are small value loans to those sectors of the society/economy that impact large segments of the population and weaker sections, and to the sectors which are employment-intensive such as agriculture and small enterprises.

The following have been declared as the priority sectors by RBI:

1. Agriculture,
2. Education,
3. Housing,
4. Micro, Small & Medium Enterprises (MSME),
5. Export Credit,
6. Social Infrastructure (Schools, hospitals etc),
7. Renewable Energy and
8. Others (weaker sections like artisans, village cottage industries, SC/ST, Self Help Groups etc.)

RBI has classified loans to food & agro-based processing units and Cold Chain under agriculture activities for Priority Sector Lending (PSL).

Answer: (a)

Hot money is a term that is most commonly used in financial markets to refer to the flow of funds (or capital) from one country to another in order to earn a short-term profit on interest rate differences and/ or anticipated exchange rate shifts.

These speculative capital flows are called "hot money" because they can move very quickly in and out of markets, potentially leading to market instability.

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: (d)

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.