money supply, banking & financial institutions section 7 MCQ Questions & Answers Detailed Explanation

Answer: (b)

Legal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Paper currency and coins are common forms of legal tender in many countries. Legal tender money is a type of payment that is protected by law.

A legal tender, also known as the forced tender, is very secured and it is impossible to deny the legal tender while subsiding a debt that is assigned in the same medium of exchange. The term legal tender does not represent the money itself; rather it is a kind of status that can be bestowed on certain types of money.

Answer: (a)

Answer: (b)

Indo Next is a new stock exchange, set up to promote liquidity to stocks of small and medium enterprises.

Answer: (c)

GDP (Output) is the final value of goods and services produced in the economy. But there are a lot of transactions that happen in the economy for intermediate goods, so the value of transactions is higher than the value of final output in the economy.

For example, suppose, I purchased Rs. 30 of input to produce Rs. 100 of the final output, which I sold in the market. GDP will be Rs. 100, while the value of transactions in the economy will be Rs. 130.

Since money keeps on moving between different hands, the same money is used for transacting again and again (also referred to as the velocity of circulation), so the money required for doing transactions will be less than the total value of transactions in the economy.

As of 13th March 2020, Money Supply in the economy was Rs. 165 lakh crores. While GDP of 2019-20 is expected to be Rs. 204.4 lakh crore. And the value of transactions is much more than the GDP.

Answer: (b)

Certificate of Deposit (CD) and Commercial Paper (CP) markets were introduced by Reserve Bank of India in March 1989 in order to widen the range of money market instruments and give investors greater flexibility in the deployment of their shortterm surplus funds.

Answer: (a)

A creditor is a party (e.g. person, organization, company, or government) that has a claim to the services of a second party. It is a person or institution to whom money is owed. The second party is frequently called a debtor or borrower.

An incorporated entity is a separate legal entity that has been incorporated through a legislative or registration process established through legislation. Both bondholders and stockholders are creditors of a corporation.