money supply, banking & financial institutions section 11 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) lending by commercial banks to industry and trade
(b) None of the above
(c) purchases and sale of government securities by the RBI
(d) borrowing by scheduled banks from the RBI
The correct answers to the above question in:
Answer: (c)
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Read more money and supply banking financial institutions Based Indian Economy Questions and Answers
Question : 1
Assertion (A):
Devaluation of a currency may promote export.
Reason (R):
The price of the country’s products in the international market may fall due to devaluation.
In the context of the above two statements, select the correct answer from the codes given below.
a) Both (A) and (R) are true, but (R) is not the correct explanation of (A)
b) (A) is false, but (R) is true
c) (A) is true, but (R) is false
d) Both (A) and (R) are true and (R) is the correct explanation of (A)
Answer »Answer: (d)
Question : 2
Which of the following would best describe the role of a merchant bank?
a) To monitor the activities of publicly-list companies
b) To provide borrowing and leading services, primarily to the business sector
c) To act as banker and financial agent to the federal government
d) To provide loans to the corporate sector through receipts of insurance premiums
Answer »Answer: (b)
Question : 3
Under flexible exchange rate system, the exchange rate is determined by
a) the price of gold
b) the purchasing power of currencies
c) the Central Bank of the country
d) the forces of demand and supply in the foreign exchange market
Answer »Answer: (d)
A floating exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market.
It refers to a country's exchange rate regime where its currency is set by the foreign exchange market through supply and demand for that particular currency relative to other currencies.
Question : 4
Consider the following statements regarding ‘ways and means’ advance:
- It is available for both Central and State governments
- Government need to pay interest on ways and means advance
- It is to meet the temporary mismatches of receipts and payments
a) (i) & (iii) only
b) (ii) & (iii) only
c) (i) only
d) All of the above
Answer »Answer: (d)
The Reserve Bank of India gives temporary loan facilities to the centre and state governments as a banker to the government. This temporary loan facility is called Ways and Means Advances (WMA).
The WMA scheme was designed to meet temporary mismatches in the receipts and payments of the government. This facility can be availed by the government if it needs immediate cash from the RBI.
The WMA is a loan facility from the RBI for 90 days which implies that the government has to vacate the facility after 90 days.
The interest rate for WMA is currently charged at the repo rate. The limits for WMA are mutually decided by the RBI and the Government of India.
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