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
- It will help in the mobilization of gold held by households and institutions
- It will facilitate the use of gold for productive purpose
- It will help in reducing the import of gold and the Current Account Deficit (CAD)
- Banks will be allowed to lend this gold to jewellers
(a) (i), (ii) & (iii) only
(b) (ii) & (iv) only
(c) (i) & (iii) only
(d) All of the above
The correct answers to the above question in:
Answer: (d)
Through this scheme, the households will be able to deposit their gold/ jewellery with the banks which they will melt and convert into gold bars and could sell these gold bars to jewellers.
The depositors of gold will earn a fixed interest rate (denominated in terms of gold) and they will get their gold back after the maturity period or cash whatever they want.
Through this scheme, the government wants to mobilize the gold jewellery lying with the households for productive purposes. This will also help in reducing the gold imports and Current Account Deficit (CAD).
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Read more money and supply banking financial institutions Based Indian Economy Questions and Answers
Question : 1
Consider the following.
- Industrial Finance Corporation of India (IFCI)
- Industrial Credit and Investment Corporation of India (ICICI)
- Industrial Development Bank of India (IDBI)
- Unit Trust of India (UTI)
a) 1, 3, 2, 4
b) 1, 4, 3, 2
c) 4, 3, 2, 1
d) 1, 2, 3, 4
Answer »Answer: (b)
Question : 2
Which of the following constitute Capital Account in BoP?
- Global Depository Receipts (GDRs)
- International Trade Credit
- Government securities purchased by foreign Investors
- Securities purchased by foreign portfolio investors
a) (iii) & (iv) only
b) All of the above
c) (i) & (ii) only
d) None of the above
Answer »Answer: (b)
Those transactions come under Capital Account (BoP) which creates future obligations/ liabilities or changes in assets/liabilities. For example, loans, shares, deposits etc.
Global Depository Receipts (GDRs) are basically shares issued abroad by a domestic company. International Trade Credit means credit/loan given for trade purposes abroad.
Securities are basically financial assets, so they will always be included in Capital Account.
So, all are part of the Capital Account of BoP
Question : 3
Which is the first Private Sector Bank in India to use Software Robotics?
a) HDFC Bank
b) UTI Bank
c) SBI
d) ICICI Bank
Answer »Answer: (d)
Question : 4
Which one of the following statements is correct with reference of FEMA in India?
a) FERA was given a sunset clause of one year till 31st May, 2002 to enable enforcement directorate to complete the investigation of pending issues
b) As per the new dispensation, enforcement directorate can arrest and prosecute the people for the violation of foreign exchange rule
c) Under FEMA, violation of foreign exchange rules has ceased to be a criminal offence
d) The Foreign Exchange Management Act (FEMA) in the year 2001
Answer »Answer: (c)
Question : 5
“Dear Money” means
a) depression
b) inflation
c) low rate of interest
d) high rate of interest
Answer »Answer: (d)
Dear Money, also known as tight money, is money that has to be borrowed at a high-interest rate, and so restricts expenditure by companies.
This situation can be a result of a restricted money supply, causing interest rates to be pushed up due to the forces of supply and demand. Businesses may have a tough time raising capital during a period of dear money.
Question : 6
‘Gresham’s Law’ in Economics relates to
a) consumption of supply
b) distribution of goods and services
c) supply and demand
d) circulation of currency
Answer »Answer: (d)
Gresham’s law is an economic principle that states:
“When a government compulsorily overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation.”
It is commonly stated as: “Bad money drives out good.”
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money supply, banking & financial institutions section 5
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