money supply, banking & financial institutions section 8 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) Cash reserve of the commercial banks + other deposits with the RBI
(b) Currency held by the public + Cash reserves of the commercial banks + Time deposits of commercial banks + Other deposits with the RBI
(c) Currency held by the public + Cash reserves of the commercial banks + Other deposit with the RBI
(d) Currency held by public + other deposits with the RBI
The correct answers to the above question in:
Answer: (c)
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Read more money and supply banking financial institutions Based Indian Economy Questions and Answers
Question : 1
The smaller the Cash Reserve Ratio, the scope for lending by banks is :
a) weaker
b) lesser
c) greater
d) smaller
Answer »Answer: (c)
Cash Reserve Ratio is a regulation set by the Central bank (RBI in India) which dictates the minimum amount (reserves) that a commercial bank must be held to customer notes and deposits.
A decrease in CRR will make it mandatory for the banks to hold a lesser proportion of their deposits in the form of deposits with the RBI. This will increase the number of Bank deposits and they will lend more as they have more amount as their reserve.
Question : 2
‘Money is a matter of functions four, a medium, a measure a standard and .....’. What is the fourth function of money indicated in this popular phrase?
a) A flow
b) A payment
c) A store
d) A stock
Answer »Answer: (c)
Question : 3
The Laffer curve is the graphical representation of:
a) The relationship between tax rates and absolute revenue these rates generate for the government.
b) The inequality in income distribution.
c) The inverse relationship between the rate of unemployment and the rate of inflation in an economy.
d) The relationship between environmental quality and economic development.
Answer »Answer: (a)
In economics, the Laffer curve is a hypothetical representation of the relationship between government revenue raised by taxation and all possible rates of taxation.
It is used to illustrate the concept of taxable income elasticity – which taxable income will change in response to changes in the rate of taxation.
Question : 4
Which action by the Reserve Bank would stimulate the economy in an economic downturn?
a) Selling government securities in the cash market
b) Selling foreign currencies on the foreign exchange market
c) Buying government securities in the cash market
d) Buying foreign currencies on the foreign exchange market
Answer »Answer: (c)
Question : 5
In India, the interest rate on savings accounts in all the nationalised commercial banks is fixed by
a) Union Finance Commission
b) Banks itself
c) Indian Bank’s Association
d) Union Ministry of Finance
Answer »Answer: (b)
Question : 6
Consider the following statements:
- In Minimum Reserve System, RBI had to keep a minimum reserve of Gold worth ` 115 Crores and rest in Indian Rupees.
- The Minimum Requirement of Foreign Securities was diluted when Minimum Reserve System was launched.
a) Only 2 is correct
b) Only 1 is correct
c) Both of them are correct
d) Both of them are incorrect
Answer »Answer: (c)
GET Money Supply, Banking and Financial Institutions PRACTICE TEST EXERCISES
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Money Supply, Banking and Financial Institutions Shortcuts and Techniques with Examples
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