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) Statutory Liquidity Ratio
(b) Minimum Reserve Ratio
(c) Variable Reserve Ratio
(d) Cash Reserve Ratio
The correct answers to the above question in:
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.
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Read more money and supply banking financial institutions Based Indian Economy Questions and Answers
Question : 1
..... is the official minimum rate at which the Central Bank of a country is prepared to rediscount approved bills held by the commercial banks.
a) Bank rate
b) Reverse repo rate
c) Prime lending rate
d) Repo rate
Answer »Answer: (a)
Question : 2
The slogan ‘Pure Banking, Nothing else’ is raised by
a) HDFC Bank
b) UTI Bank
c) SBI
d) ICICI Bank
Answer »Answer: (c)
Question : 3
Which of the following may lead to an increase in the overall prices?
- Increase in effective demand
- Decrease in the aggregate level of output
- Increase in aggregate output
- An increase in overall employment
a) (ii) & (iv) only
b) (i), (ii) & (iv) only
c) (i) & (iv) only
d) All of the above
Answer »Answer: (b)
If aggregate demand increases by 10 per cent and aggregate supply increases by only 8 per cent then it leads to an effective increase in demand of 2 per cent which results in inflation.
When aggregate/overall output decreases then even if we assume demand as constant then it will lead to an increase in effective demand which results in higher inflation.
Higher employment increases demand in the economy and may result in higher inflation.
Question : 4
Which among the following would most likely follow if the Reserve Bank of India effects selling of the securities?
a) The cash resources at the disposal of the commercial banks increase.
b) The cash resources of the commercial banks remain unchanged.
c) The cash resources at the disposal of the commercial banks get diminished.
d) None of the above.
Answer »Answer: (c)
Question : 5
Consider the following statements:
- Sensex is based on 50 of the most important stocks available on the Bombay stock Exchange (BSE).
- For calculating the Sensex, all the stock are assigned proportional weightage.
- New York Stock Exchange is the oldest stock exchange in the world.
a) 1 and 3
b) 2 only
c) 2 and 3
d) none
Answer »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.
Question : 6
Which of the following groups suffer the most from inflation?
a) Business class
b) Holders of real assets
c) Debtros
d) Creditors
Answer »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.
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money supply, banking & financial institutions section 12
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