money supply, banking & financial institutions section 10 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 value of money is increasing.
(b) The price level is stagnant.
(c) The value of money is falling.
(d) The price of goods is increasing.
The correct answers to the above question in:
Answer: (a)
Deflation is a situation where the prices of goods and commodities in a country go down. i.e., there is negative inflation. This is caused due to reduced supply of money/credit.
Inflation reduces the real value of money over time; conversely, deflation increases the real value of money – the currency of a national or regional economy.
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Read more money and supply banking financial institutions Based Indian Economy Questions and Answers
Question : 1
Who is the ‘lender of the last resort’ in the banking structure of India?
a) Reserve Bank of India
b) Union Bank of India
c) Exim Bank of India
d) State Bank of India
Answer »Answer: (a)
Question : 2
Consider the following statements regarding Cash Reserve Ratio (CRR) kept with RBI by commercial banks:
- It ensures safety to the people’s deposits in banks
- It ensures the solvency of banks
- It increases the cost of funds for the banks
- Banks earn interest on CRR
a) (i) & (ii) only
b) (i), (ii) & (iii) only
c) (i) only
d) All of the above
Answer »Answer: (b)
One of the basic reasons for keeping CRR with RBI is to provide safety to the public deposits. It also ensures the solvency of banks i.e. staying in business and proper functioning and liquidity situation.
Since banks do not earn interest on the CRR, so it is idle money for the banks which increases costs for banks.
Question : 3
Which one of the following is a developmental expenditure?
a) Debt services
b) Grant–in–aid
c) Irrigation expenditure
d) Civil administration
Answer »Answer: (c)
Public expenditure whether plans or non-plan or capital or revenue is classified into developmental and non-developmental expenditure. The expenditure which is incurred on activities directly related to economic development is called developmental expenditure.
Hence, expenditure incurred on education, health care, scientific research; infrastructure and so on is developmental expenditure. Expenditure incurred on general essential services required for the normal running of the government is termed as a non-developmental expenditure.
Therefore, expenditure incurred on services relating to general administration, police, defence, judiciary etc. is non-developmental expenditure.
Question : 4
The term stagflation refers to a situation where
a) rate of growth in faster than the rate of price increase
b) rate of growth is slower than the rate of price increase
c) growth has no relation with the change in prices
d) rate of growth and prices both are decreasing
Answer »Answer: (b)
In economics, stagflation is a situation in which the inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high.
Stagflation occurs when the economy isn’t growing but prices are, which is not a good situation for a country to be in.
This happened to a great extent during the 1970s, when world oil prices rose dramatically, fueling sharp inflation in developed countries. For these countries, including the U.S., stagnation increased the inflationary effects.
Question : 5
Green banking means
a) financing of irrigation projects by banks
b) None of the above
c) development of forestry by banks
d) financing of environmental friendly projects by banks
Answer »Answer: (d)
Green banking is like a normal bank, which considers all the social and environmental/ecological factors with an aim to protect the environment and conserve natural resources. It is also called an ethical bank or a sustainable bank.
They are controlled by the same authorities but with an additional agenda toward taking care of the Earth’s environment/ habitats/resources.
Question : 6
FEMA (Foreign Exchange Management Act) was finally implemented in the year
a) 1997
b) 2007
c) 2000
d) 1991
Answer »Answer: (c)
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