money supply, banking & financial institutions section 6 MCQ Questions & Answers Detailed Explanation
MOST IMPORTANT indian economy mcq - 12 EXERCISES
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The following question based on Money Supply, Banking and Financial Institutions topic of indian economy mcq
(a) Credit risk
(b) Operational risk
(c) Market risk
(d) All the above categories
The correct answers to the above question in:
Answer: (c)
Practice Money Supply, Banking and Financial Institutions (money supply, banking & financial institutions section 6) Online Quiz
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Read more money and supply banking financial institutions Based Indian Economy Questions and Answers
Question : 1
Cheap Money means
a) Low level Income
b) Excess of Black Money
c) Low Rate of Interest
d) Low level of Savings
Answer »Answer: (c)
‘Cheap Money’ is a loan or credit with a low interest rate or the setting of low-interest rates by a central bank like the Federal Reserve.
Cheap money is good for borrowers, but bad for investors, who will see the same low-interest rates on investments like savings accounts, money market funds, CDs and bonds.
Question : 2
Gresham’s Law means
a) Good money promotes bad money in the system
b) Bad money promotes good money in the system
c) Good money replaces bad money in circulation
d) Bad money replaces good money in circulation
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.”
More exactly, if coins containing metal of different value have the same value as legal tender, the coins composed of the cheaper metal will be used for payment, while those made of more expensive metal will be hoarded or exported and thus tend to disappear from circulation.
Question : 3
Which one of the following pairs is not correctly matched?
a) Social Security Measures - Bharat Nirman
b) Rural Employment – SJSRY
c) Rural Credit - NABARD
d) Industrial Finance - SIDBI
Answer »Answer: (b)
Question : 4
Commercial banks create credit
a) on the basis of their reserve fund
b) on the basis of their deposits
c) on the basis of their securities
d) on the basis of their assets
Answer »Answer: (b)
Commercial banks create credit on the basis of their deposits. Credit creation is the multiple expansions of banks that demand deposits.
Whenever, customer deposits a sum of money, a part of that money is kept by the commercial banks with the credit bank of the country which is obligatory by the law.
The amount of credit that can be created by the bank will depend on the primary deposits and also on the amounts of minimum legal resource requirement.
Question : 5
Consider the following statements regarding Insolvency and Bankruptcy Code (IBC) 2016:
- IBC is applicable for Financial Service Providers like NBFCs
- Central Government has the authority to decide which type of financial service providers will be included for resolution under IBC
- IBC has not been made applicable for insolvency of banks
a) (i) & (ii) only
b) (iii) only
c) (i) only
d) All of the above
Answer »Answer: (d)
IBC Code 2016 was not made applicable for the insolvency of financial service providers like Banks and NBFCs. But since some major NBFCs like DHFL, IL&FS faced a crisis, the government thought of bringing NBFCs temporarily under IBC for resolution.
So, GoI, on 15th Nov 2019 notified section 227 under IBC Code which says that the IBC rules shall apply to such financial service providers or categories of financial service providers, as may be notified by the Central Government under section 227, from time to time, for the purpose of their insolvency and liquidation proceedings under these rules.
This is a temporary mechanism because, for the resolution of insolvencies of Banks and NBFCs, we have a bill pending, Financial Resolution and Deposit Insurance (FRDI) Bill, which the government is planning to introduce soon.
Question : 6
The share broker who sells shares in the apprehension of falling prices of shares is called
a) Bear
b) Stag
c) Bull
d) Dog
Answer »Answer: (a)
A bear market is a market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining.
As investors anticipate losses in a bear market and selling continues, pessimism only grows.
Bear investors believe that the value of a specific security or an industry is likely to decline in the future. Bears attempt to profit from a decline in prices. Bears are generally pessimistic about the state of a given market.
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