money supply, banking & financial institutions section 9 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) The sum of currency in circulation with the public and the cash reserves held by banks
(b) The market value of the stocks held by all the holders excluding the promoters
(c) The sum of currency in circulation and the demand deposits in banks
(d) The sum of MI money and the time deposits
The correct answers to the above question in:
Answer: (c)
The four main monetary aggregates of measures of money supply that reflect the state of the monetary sector are:-
- M1(Narrow money)= Currency with the public + demand deposits of the public;
- M2 = M1 + Post Office Savings deposits;
- M3 (Broad money)= M1 + time deposits of the public with banks; and
- M4 = M3 + Total post office deposits.
So ‘Narrow Money’ is simply a category of money supply that includes all physical money like coins and currency along with demand deposits and other liquid assets held by the central bank.
This category of money is considered to be the most readily available for transactions and commerce.
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Question : 1
Bank money refers to
a) gold bullions
b) cheques
c) currency notes
d) coins
Answer »Answer: (b)
There are two types of money in a fractional-reserve banking system, currency originally issued by the central bank, and bank deposits at commercial banks:
- central bank money (all money created by the central bank regardless of its form, e.g. banknotes, coins, electronic money); and
- commercial bank money (money created in the banking system through borrowing and lending) - sometimes referred to as chequebook money.
Question : 2
As per the new Monetary Policy Framework, who will determine the inflation target?
a) Reserve Bank of India (RBI)
b) Govt. of India in consultation with RBI
c) Government of India (GoI)
d) Monetary Policy Committee
Answer »Answer: (b)
The inflation target is decided by the Government of India in consultation with RBI
Question : 3
Which of the following category of financial institutions are not involved in the implementation of Kisan Credit Cards (KCC)?
a) Cooperative Banks
b) Small Finance Banks
c) Regional Rural Banks (RRBs)
d) Non-Banking Financial Institutions (NBFCs)
Answer »Answer: (d)
The Kisan Credit Card Scheme is being implemented by Commercial Banks, RRBs, Small Finance Banks and Cooperatives.
Question : 4
Convertibility of the Rupee as it exists at present means
a) Rupee is convertible into foreign currencies for trade transactions only
b) Rupee is convertible into foreign currencies for capital transactions only
c) Rupee is convertible into foreign currencies for all current transactions only
d) Rupee is convertible into foreign currencies for all types of transactions
Answer »Answer: (c)
Question : 5
Which one of the following statement is correct regarding increase in the cash reserve ratio in India?
a) It reduces credit creation
b) It denotes liberal monetary policy
c) It does not affect credit
d) It increases credit creation
Answer »Answer: (a)
Question : 6
Which of the following statements are true regarding “Alternative Mechanism”?
a) It is an inter-ministerial body to identify PSUs for strategic disinvestment
b) It is the nodal department for strategic disinvestment
c) It is an inter-ministerial body to fasten the process of strategic disinvestment
d) None of the above
Answer »Answer: (c)
As per the new policy (2019), Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance has been made the nodal department for the strategic disinvestment. DIPAM and NITI Aayog will now jointly identify PSUs for strategic disinvestment and then it is approved by CCEA.
Government has created an “Alternative Mechanism”, which is an inter-Ministerial body to fasten the process of strategic disinvestment. It will decide the following:
The quantum of shares to be transacted, mode of sale and final pricing of the transaction or lay down the principles/ guidelines for such pricing; and the selection of strategic partner/ buyer; terms and conditions of sale; and
To decide on the proposals of Core Group of Secretaries on Disinvestment (CGD) with regard the timing, price, the terms & conditions of sale, and any other related issue to the transaction.
This will facilitate quick decision-making and obviate the need for multiple instances of approval by CCEA for the same CPSE.
GET Money Supply, Banking and Financial Institutions PRACTICE TEST EXERCISES
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