money supply, banking & financial institutions section 7 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

Questions : Pegging up of a currency means, fixing the value of a currency

(a) at a higher level

(b) leaving it to market forces

(c) at a constant level

(d) at a lower level

The correct answers to the above question in:

Answer: (c)

Currency pegging is the idea of fixing the exchange rate of a currency by matching its value to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold or silver.

A fixed exchange rate is usually used to stabilize the value of a currency, with respect to the currency or the other valuable it is pegged to.

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Read more money and supply banking financial institutions Based Indian Economy Questions and Answers

Question : 1

What are the causes of inflation?

  1. Increase in demand for goods & services
  2. Decrease in the supply of goods & services
  3. Decrease in demand for goods & services
  4. Increase in the supply of goods & services
Choose the correct code.

a) 3 and 4

b) 1 and 2

c) 1 and 4

d) 2 and 3

Answer: (b)

Inflation occurs due to two main factors:

  1. Increase in demand for goods & services,
  2. Decrease in the supply of goods & services

Question : 2

For channelising the unaccounted money for productive purposes the Government Introduced the scheme of :

a) Provident Funds

b) Market Loans

c) Special Bearer Bonds

d) Resurgent India Bonds

Answer: (c)

The Special Bearer Bonds (Immunities And Exemptions) Act, 1981 laid down the purpose of such bonds as necessary to canalize for productive purposes black money which has become a serious threat to the national economy.

With a view to such canalization, the Central Government decided to issue at par certain bearer bonds to be known as the Special Bearer Bonds, 1991.

Question : 3

Which of the following measures would result in an increase in the money supply in the economy?

  1. Purchase of government securities from the public by the Central Bank
  2. Deposit of currency in commercial banks by the public
  3. Borrowing by the government from the Central Bank
  4. Sale of government securities to the public by the Central Bank
Select the correct answer using the codes given below :

a) 2 and 4

b) 1 only

c) 1 and 3

d) 2, 3 and 4

Answer: (c)

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