money supply, banking & financial institutions section 11 MCQ Questions & Answers Detailed Explanation

Question : 1

Consider the following statements regarding Money Multiplier:

1. It increases with an increase in reserve requirements of banks
2. It decreases with an increase in reserve requirements of banks
3. It increases with Monetary Base
4. It decreases with Monetary Base

a) (ii) only

b) (ii) & (iii) only

c) (i) only

d) (ii) & (iv) only

Question : 2

The term "Nostro Account" was recently in the news is related to:

1. It is an account that one bank holds in another bank
2. It is used to facilitate international transactions

a) (ii) only

b) Both (i) & (ii)

c) (i) only

d) Neither (i) nor (ii)

Question : 3

Bring out the only incorrect statement:

a) Reverse Repo operation by RBI aims at injecting/ increasing liquidity

b) Rupee appreciation results in decrease in imports

c) SDR refers to special drawing rights

d) Increase in inflation rate leads to decline in real interest rate

Question : 4

Which among the following gives a precise definition of “ Arbitrage” in Financial World?

a) To profit from an existing discrepancy among prices, exchange rates, and/or interest rates on Different Markets without risk of these changing

b) To profit from an existing discrepancy among prices, exchange rates, and/or interest rates on new techniques or products in same market.

c) to profit from an existing discrepancy among prices, exchange rates, and/or interest rates on Same market without risk of these changing

d) All of above

Question : 5

Consider the following statements:

1. Through masala bonds, capital is raised in foreign currency
2. Through masala bonds capital is raised in domestic currency
3. By issuance of masala bonds, the exchange risk is transferred to the investor

a) (ii) only

b) (i) & (iii) only

c) (i) only

d) (ii) & (iii) only

Question : 6

With reference to the Indian Public Finance, consider the following statements:

1. External liabilities reported in the Union Budget are based on historical exchange rates
2. The continued high borrowing has kept the real interest rates high in the economy
3. The upward trend in the ratio of Fiscal Deficit of GDP a recent years has a adverse effect on private investment
4. Interest payments is the single largest component of the non-plan revenue expenditure of the Union Government

a) 1 and 4

b) 1, 2 and 3

c) 2, 3 and 4

d) 1, 2, 3 and 4