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) HDFC Bank
(b) UTI Bank
(c) SBI
(d) ICICI Bank
The correct answers to the above question in:
Answer: (c)
Practice Money Supply, Banking and Financial Institutions (money supply, banking & financial institutions section 9) Online Quiz
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Read more money and supply banking financial institutions Based Indian Economy Questions and Answers
Question : 1
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 : 2
Consider the following statements:
- As per the Basel II accords, Banks have to maintain a minimum 8% CRAR
- Out of 8% Banks have to keep a Tier I Capital of 5%
- In India, the Banks are required to keep the CAR of 9% at least.
a) Only 1 & 2
b) Only 1
c) Only 1 & 3
d) All are correct statements
Answer »Answer: (c)
Question : 3
If the US Central Bank raises their interest rate then it may lead to which of the following in the Indian economy:
a) Rupee appreciation
b) Investors moving to India
c) Rupee depreciation
d) Increase in money supply
Answer »Answer: (c)
When the US Federal Bank increases the interest rate, then the foreign investors sell their investments in India (mostly debt instruments) and move to US. In the process they convert the Rupee into dollars in the forex market and the demand for dollar increases and rupee depreciates.
Money supply in the Indian economy will decrease in this case because foreign investors are selling their investments and taking money out of India.
Question : 4
..... 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 : 5
The ratio of a bank’s cash holdings to its total deposit liabilities is called the
a) Statutory Liquidity Ratio
b) Minimum Reserve Ratio
c) Variable Reserve Ratio
d) Cash Reserve Ratio
Answer »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.
Question : 6
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)
GET Money Supply, Banking and Financial Institutions PRACTICE TEST EXERCISES
money supply, banking & financial institutions section 1
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money supply, banking & financial institutions section 12
Money Supply, Banking and Financial Institutions Shortcuts and Techniques with Examples
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