money supply, banking & financial institutions section 10 MCQ Questions & Answers Detailed Explanation

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.

Answer: (b)

Money supply = (Money Multiplier) X (Monetary Base)

From the above formula, the money supply can be increased by increasing the money multiplier or monetary base or both.

Answer: (d)

Foreign Direct Investment can come through two routes viz. automatic and government approval routes. More than 95% of the FDI comes in India through the “Automatic Route” where no government approval is required and are subject to only sectoral laws. Certain sectors that are still under the “Government approval route” are scrutinised and cleared by the respective departments and ministries.

In respect of applications in which there is a doubt about the Administrative Ministry/Department concerned, DPIIT shall identify the Administrative Ministry/Department where the application will be processed.

In respect of proposals where the respective department/ ministry proposes to reject the proposals or in cases where conditions for approval are stipulated in addition to the conditions laid down in the FDI policy or sectoral laws/regulations, the concurrence of DPIIT shall compulsorily be sought by the said Ministry.

The Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry sets the rules for foreign investment and makes policy pronouncements on FDI through various Press Releases.

Answer: (a)

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.

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.