money supply, banking & financial institutions section 6 MCQ Questions & Answers Detailed Explanation

Question : 1

Which of the following terms indicates a mechanism used by commercial banks for providing credit to the government?

a) Debt Service Obligation

b) Statutory Liquidity Ratio

c) Liquidity Adjustment Facility

d) Cash Credit Ratio

Question : 2

The Real Rate of Interest is equal to the Nominal Interest Rate minus inflation. Consider the following statements:

1. Real Interest Rate must be positive to encourage savings and reduce consumption
2. Real Interest Rate must be negative to encourage savings and reduce consumption
3. Real interest rate is always positive
4. Inflation rate in the market may be negative

a) (iii) only

b) (i) & (iii) only

c) (i) only

d) (i) & (iv) only

Question : 3

Provident Fund in India is

a) Residual Savings

b) Employer’s Savings

c) Voluntary Savings

d) Contractual Savings

Question : 4

The major objective of monetary policy is to

a) Promote economic growth with price stability

b) weed out corruption in the economy

c) increase government’s tax revenue

d) revamp the Public Distribution System

Question : 5

In the context of the Indian economy, which of the following is/are the purpose/purposes of ‘Statutory Reserve Requirements’?

1. To enable the Central Bank to control the number of advances the banks can create
2. To make the people’s deposits with banks safe and liquid
3. To prevent the commercial banks from making excessive profits
4. To force the banks to have sufficient vault cash to meet their day-to-day requirements

a) 1 and 2 only

b) 1 only

c) 2 and 3 only

d) 1, 2, 3 and 4

Question : 6

The _________ bank linkage programme continued to be the main micro-finance model by which the formal banking system reaches micro-entrepreneurs (including farmers).

1. Self-Help Group
2. Indian bank
3. SBI
4. PNB

a) 2 only

b) 1 only

c) 3 only

d) 4 only