public finance fiscal & monetary policy section 2 MCQ Questions & Answers Detailed Explanation

Answer: (c)

Open Market Operations refers to the RBI buying and selling eligible securities to regulate the money supply. Traditionally RBI was not resorting to this method.

However, after the large inflow of foreign funds since 1991, RBI has had to step in to sterilize the flow to avoid excess liquidity

Answer: (c)

Goods and services tax (GST) will subsume many central and state taxes, such as excise duty, service tax, valueadded tax, sales tax and luxury tax. Income tax is a direct tax, so it is not under GST.

Answer: (a)

The term ‘exit’ is the obverse of the term ‘entry’ into the industry. It refers to the right or ability of an industrial unit to withdraw from or leave an industry or in other words to close down.

The proposal to introduce an exit policy was first mooted in 1991 when it was felt that without labour market flexibility, efficient industrialization would be difficult to achieve.

The need for such a policy arises as a result of modernization, technology up-gradation, restructuring as well as the closure of industrial units. Such a policy will allow employers to shift workers from one unit to another and also retrench excess labour.

Answer: (d)

When the Reserve Bank of India reduces the Statutory Liquidity Ratio by 50 basis points; the Scheduled Commercial Banks may cut their lending rates.

Answer: (b)

Planned economic development adopted by India required an active monetary policy. The two stated aims of this policy were to boost economic development and control inflationary pressure

Answer: (b)

Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability.

The official goals usually include relatively stable prices and low unemployment. The contraction of the monetary supply can be achieved indirectly by increasing the nominal interest rates.

Monetary authorities in different nations have differing levels of control of economy-wide interest rates.