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
(a) Revaluation
(b) Deflation
(c) Appreciation
(d) Depreciation
The correct answers to the above question in:
Answer: (a)
Revaluation is a calculated adjustment to a country’s official exchange rate relative to a chosen baseline.
The baseline can be anything from wage rates to the price of gold to a foreign currency.
In a fixed exchange rate regime, only a decision by a country’s government (i.e. central bank) can alter the official value of the currency.
It is the opposite of devaluation.
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Read more money and supply banking financial institutions Based Indian Economy Questions and Answers
Question : 1
What is the main cost-push factor in India?
- Problem of hoarding by traders and black marketeers
- Taxation which gives the traders an opportunity to raise the prices of goods, the proportion of which is often more than the levy of taxes
- Administered Prices
- Hike in Oil Prices
a) 1, 2, 3, 4
b) 1, 2, 3
c) 1, 2
d) None of the Above
Answer »Answer: (a)
the main cost-push factor in India are:
- Fluctuations in output and supply in both agriculture and industry sectors. Fluctuations in the output of food grains have been a major factor responsible for rising in food-grain prices as well as general prices. In the same way, the supply of manufactured goods also did not increase adequately in the last few years. Power breakdowns, strikes and lock-outs and shortage of transport facilities have been the major constraints responsible for lowering the production of manufactured goods. With ever-rising demand for manufactured goods, the producers are in a position to hike the prices of their products.
- The problem of hoarding by traders and black marketeers.
- Taxation gives the traders an opportunity to raise the prices of goods, the proportion of which is often more than the levy of taxes.
- Administered Prices.
- Hike in Oil Prices.
Question : 2
Which among 1the following is considered to be a part of Shadow Banking in India?
a) Business Correspondents
b) Non-Banking Financial Companies
c) Bankassurance Providers
d) Private Banks
Answer »Answer: (b)
Question : 3
“Bad money (if not limited in quantity ) drives good money out of circulation.” The above statement is from which among the following laws?
a) Keynes’ law
b) Gresham’s law
c) Wagner’s law
d) Grimm’s law
Answer »Answer: (b)
Question : 4
Consider the following statements regarding Foreign Direct Investment (FDI):
- FDI investment happens through the secondary market
- FDI investment is about equity securities
- FDI investment is about debt securities
a) (i) & (ii) only
b) (i) & (iii) only
c) (i) only
d) (ii) only
Answer »Answer: (d)
Question : 5
Consider the following statements:
- Open Market Operation is a monetary policy tool
- Open Market Operations take place in the secondary market
- Sterilization is a monetary policy tool
a) (i) & (iii) only
b) (iii) only
c) (i) only
d) All of the above
Answer »Answer: (d)
Open Market Operations (OMO) is a monetary policy tool where RBI buys/sells government securities in the secondary (open) market to increase or decrease the money supply.
Due to foreign investments inflow or outflow, the money supply in the Indian economy increases/ decreases. To prevent or sterilize the economy from such external shocks, RBI buys or sells government securities to keep the money supply unchanged.
This is called sterilization or Market Stabilization Scheme (MSS) and it is not a day to day phenomenon, rather less frequently used.
Question : 6
Which of the following measures would result in an increase in the money supply in the economy?
- Purchase of government securities from the public by the Central Bank
- Deposit of currency in commercial banks by the public
- Borrowing by the government from the Central Bank
- Sale of government securities to the public by the Central Bank
a) 2 and 4
b) 1 only
c) 1 and 3
d) 2, 3 and 4
Answer »Answer: (c)
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