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

Answer: (d)

Cash Reserve Ratio (CRR) is the amount of funds that the banks have to keep with the RBI.

If the central bank decides to increase the CRR, the available amount with the banks comes down.

The RBI uses the CRR to drain out excessive money from the system.

Answer: (a)

Answer: (c)

Answer: (b)

The ‘BSE SENSEX’ is a value-weighted index composed of 30 stocks and was started on 1 January 1986. The origin of the NYSE can be traced to 17 May 1792.

When the Buttonwood Agreement was signed by 24 stockbrokers outside 68 Wall Street in New York under a buttonwood tree.

Amsterdam Stock Exchange (1602) is considered the oldest in the world and was established by the Dutch East India company.

Answer: (d)

Inflation, or the general rise of price levels in an economy, has many deleterious effects. It leaves the economy as a whole poorer relative to pre-inflation levels of wealth (individual and societal).

Inflation reduces the value of each unit of currency and thus leaves the holder of that currency with lower purchasing power.

Generally speaking, those who benefit from higher inflation are debtors and those who suffer from it- creditors. If one has substantial debt, each dollar one has to repay would be worth less than when it was borrowed.

In this way, one pays back less in real terms than one had borrowed. Those who may benefit from higher inflation are people with significant debt.

Answer: (c)

RBI intervenes in the forex market to contain volatility in the exchange rate of the Rupee with respect to the dollar. There is no targeted band in which RBI tries to keep the Rupee-Dollar exchange rate.

For example, if the Rupee starts depreciating slowly over a period of time and it moves to $1 = Rs 85, then RBI may not intervene in the forex market.