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

Answer: (c)

The Banking Ombudsman Scheme enables an expeditious and inexpensive forum to bank customers for the resolution of complaints relating to certain services rendered by banks.

The Banking Ombudsman Scheme is introduced under Section 35 A of the Banking Regulation Act, 1949 by RBI with effect from 1995.

The Banking Ombudsman is a senior official appointed by the Reserve Bank of India to redress customer complaints against deficiency in certain banking services like non-payment or inordinate delay in the payment or collection of cheques, drafts, bills etc.

Answer: (a)

Bank Rate is the interest rate at which a nation’s central bank lends money to domestic banks. Often these loans are very short in duration.

Managing the bank rate is a preferred method by which central banks can regulate the level of economic activity.

Regulation of the economy through management of the money supply is referred to as monetary policy.

Answer: (d)

Devaluation in modern monetary policy is a reduction in the value of a currency with respect to those goods, services or other monetary units with which that currency can be exchanged.

‘Devaluation’ means official lowering of the value of a country’s currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency.

There are two implications for a currency devaluation. First, devaluation makes a country’s exports relatively less expensive for foreigners and second, it makes foreign products relatively more expensive for domestic consumers, discouraging imports.

As a result, this may help to reduce a country’s trade deficit.

Answer: (d)

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

Answer: (b)