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) existence of black money
(b) India’s precarious balance of payment position
(c) violent fluctuation in agricultural production
(d) fiscal deficit
The correct answers to the above question in:
Answer: (c)
Practice Money Supply, Banking and Financial Institutions (money supply, banking & financial institutions section 7) Online Quiz
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Read more money and supply banking financial institutions Based Indian Economy Questions and Answers
Question : 1
Open Market Operations refer to __________ .
a) Purchase and sale of Government securities by RBI
b) Deposit mobilisation
c) Borrowings by Scheduled banks from RBI
d) Lending by Commercial banks to industry
Answer »Answer: (a)
Open Market Operation (OMO) refers to the buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system. A central bank uses OMO as the primary means of implementing monetary policy.
Question : 2
Which of the following are the reasons that make a moderate level of inflation good for the economy?
- It increases consumption levels
- It keeps businesses profitable
- It induces people to save more
a) (i) & (ii) only
b) (iii) only
c) (ii) only
d) All of the above
Answer »Answer: (d)
In the case of low and moderate inflation, people are willing to save money and put in bank deposits because banks offer deposit rates higher than inflation rates.
People are willing to sign long term contracts (linked with inflation index) in money terms because they are confident that the relative prices of goods and services they buy and sell will not get too far out of line and it helps in promoting business.
As the prices are increasing, people are also willing to consume because if they postpone their consumption, they will have to spend more on consumption at a future date.
Question : 3
The basic aim of Lead Bank Scheme is that:
a) big banks should try to open offices in each district
b) individual banks should adopt particular districts for intensive development
c) there should be stiff competition among the various nationalized banks
d) all the banks should make intensive efforts to mobilize deposits
Answer »Answer: (b)
The basic aim of Lead Bank scheme is that the bank should adopt particular districts for intensive development by offering loans and banking services.
Question : 4
Consider the following statements:
- Debt overhang refers to a debt burden so large that an entity cannot take on additional debt to finance future projects.
- Debt trap is a situation in which it becomes difficult or impossible to repay the debt
a) (ii) only
b) Both (i) & (ii)
c) (i) only
d) Neither (i) nor (ii)
Answer »Answer: (b)
Question : 5
Which of the following statements are true regarding the Monetary Policy Committee (MPC)?
- It has the authority to decide repo rate, CRR, SLR
- Its decision is binding on RBI
a) (ii) only
b) Both (i) & (ii)
c) (i) only
d) Neither (i) nor (ii)
Answer »Answer: (a)
MPC has the authority to decide only the repo rate and not CRR & SLR or other things. Its decision of repo rate is binding on RBI.
Question : 6
Consider the following statements regarding National Housing Bank (NHB):
- NHB regulates Housing finance companies
- NHB is regulated by Govt. of India
- NHB provides direct finance for individual housing loans
- NHB provides refinance for individual housing loans
a) (i) & (iv) only
b) (ii) & (iii) only
c) (i) & (iv) only
d) (iv) only
Answer »Answer: (d)
National Housing Bank (NHB) was set up in 1988 under the National Housing Bank Act, 1987. It operates as a principal agency to promote Housing Finance Companies (HFC) both at local and regional levels and to provide financial and other support to such institutions.
NHB is regulated by RBI. Earlier, NHB regulated the activities of HFCs based on regulatory and supervisory authority derived under the NHB Act 1987, but now RBI does it.
It does not extend direct credit at the individual level but extends indirect financial assistance by way of refinancing (i.e. NHB finances those institutions which provide finance to individual borrowers, builders etc.)
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