money supply, banking & financial institutions section 7 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) Stock Market
(b) Internet Trade
(c) Banking
(d) Foreign Trade
The correct answers to the above question in:
Answer: (a)
The terms ‘bull’ and ‘bear’ describe upward and downward trends respectively of the stock market.
A bear market refers to a decline in prices, usually for a period of a few months, in a single security or asset, group of securities or the securities market as a whole.
A bull market is when prices are rising.
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Read more money and supply banking financial institutions Based Indian Economy Questions and Answers
Question : 1
Consider the following statements.
- Capital Adequacy Ratio (CAR) is the amount that banks have to maintain in the form of their own funds to offset any loss that banks incur, if the accountholders fail to repay dues.
- CAR is decided by each individual bank.
a) Only 2
b) Neither 1 nor 2
c) Both 1 and 2
d) Only 1
Answer »Answer: (d)
Question : 2
Consider the following statements regarding "Sovereign Wealth Funds (SWFs)":
- SWFs are State-owned investment funds
- SWFs are established through fiscal and trade surpluses
- They are used to stabilize the budget and economy of the country from excess volatility in revenues
- SWFs typically invests in government-owned projects/assets
a) (ii) & (iii) only
b) (ii), (iii) & (iv) only
c) (i) & (iv) only
d) (i), (ii) & (iii) only
Answer »Answer: (d)
A Sovereign Wealth Fund (SWF) is a State (Government) owned investment fund or entity that is commonly established from export surpluses, fiscal surpluses, proceeds from privatization etc.
Countries generally create SWFs to diversify their revenue streams to protect and stabilize the budget and economy from excess volatility. For ex., UAE relies on oil exports for its wealth.
Hence, it devotes a portion of its reserves to an SWF that invests in diversified assets that can act as a shield against oil-related risks (when oil prices plunge, govt’s budgetary resources/taxes decline, and SWFs act as a buffer).
SWFs typically invest in multiple asset classes including publicly listed shares, fixed income, private equity, private debt, real estate, infrastructure etc.
Question : 3
Consider the following statements regarding an economy facing disinflation:
- Companies defer their investments
- People defer their expenditures
- Demand decreases
- Unemployment increases
a) (i) & (iii) only
b) None of the above
c) (i) only
d) All of the above
Answer »Answer: (b)
Disinflation is when inflation is decreasing but prices are still increasing.
So, in an economy when inflation decreases, the demand for goods and services increases and people spending increases and it supports business activity resulting in a decrease in unemployment.
So, all the statements are wrong.
Question : 4
Recently, one of the well known market analysts made this statement: “We expect the Reserve Bank of India to continue to ease liquidity” Which among the following instruments can be used by RBI to continue to ease liquidity?
- Cutting the frequency of Open Market Operations
- Cutting the Cash Reserve Ratio
- Cutting the Repo and Reverse Repo rates
a) Only 1 & 2
b) Only 1
c) Only 2 & 3
d) 1, 2 & 3
Answer »Answer: (c)
Question : 5
Consider the following statements:
- Non-Performing Assets of scheduled commercial banks is more than non-banking financial companies
- Presently, the Capital Adequacy Ratio of scheduled commercial banks is around 15%
a) (ii) only
b) Both (i) & (ii)
c) (i) only
d) Neither (i) nor (ii)
Answer »Answer: (b)
The Gross Non-Performing Advances ratio of Scheduled Commercial Banks has remained unchanged at 9.3 per cent between March and September 2019 and increased slightly for the Non-Banking Financial Corporations from 6.1 per cent to 6.3 per cent.
The capital to Risk-weighted Asset ratio (Capital adequacy ratio) of Scheduled Commercial Banks increased from 14.3 per cent to 15.1 per cent between March 2019 and September 2019.
Question : 6
“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)
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