money supply, banking & financial institutions section 9 MCQ Questions & Answers Detailed Explanation

Answer: (c)

Answer: (d)

One of the most famous axioms in economics is “bad money drives out good.” This rule has generally been attributed to Sir Thomas Gresham (1519–1579), an English financier who advised King Edward VI and Queen Elizabeth I with regard to financial matters, and it is popularly known as Gresham’s Law.

The key prerequisite is that there must be two forms of money or currency (with the same face value) in circulation simultaneously.

The acceptance of both currencies at the same face value is required by legal tender laws enacted by the government. One of the currencies is artificially overvalued, and the other currency is artificially undervalued.

In such situations, the bad money (the artificially overvalued one) tends to drive the good money (the artificially undervalued one) out of circulation. In other words, people spend the bad money and hoard the good money.

Answer: (b)

The RESIDEX was first launched in 2007 by the National Housing Bank (NHB) to provide an index of residential prices in India across cities and over time. It is the first housing price index in India.

It was launched in order to fill the price information gap and to streamline the process of development of property in various cities across the country.

Answer: (b)

Answer: (b)

There is no international authority that directs that trade between two countries should happen only with some specific currencies. Any two countries are free to transact with any currency if they are willing.

Generally, any country will accept that currency for its trade (exports), if that currency is not losing value (less inflation) and it is stable and it is freely convertible in other currencies.

Answer: (d)

When the interest rate moves up in the economy, government securities (bonds) prices go down. If the liquidity in the economy is surplus, the interest rate comes down in the economy resulting in higher bond prices.

Developments in money, capital and forex markets also impact the interest rates and liquidity in the domestic economy resulting in changes in government securities prices.