introduction to indian economy section 2 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (b)

Imperial Chemical Industries (ICI) was a British chemical company, taken over by a number of chemical companies, including Huntsman Corporation, a United States-based company, and AkzoNobel, a Dutch conglomerate, two of the largest chemical producers in the world.

In its heyday, ICI was the largest manufacturing company in the British Empire, and commonly regarded as a “bellwether of the British economy. It produced paints and speciality products (including ingredients for foods, speciality polymers, electronic materials, fragrances and flavours).

Answer: (b)

Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation’s economy. It is used to stabilize the economy over the course of the business cycle.

Fiscal policy is the sister strategy to monetary policy through which a central bank influences a nation’s money supply.

Answer: (b)

Bank Rate refers to the official interest rate at which RBI will provide loans to the banking system which includes commercial/cooperative banks, development banks etc.

Such loans are given out either by direct lending or by rediscounting (buying back) the bills of commercial banks and treasury bills. Thus, the bank rate is also known as the discount rate.

Answer: (a)

All developing countries like India are mixed economies. A mixed economy is neither pure capitalism nor pure socialism but a mixture of the two systems.

The features of a mixed economy which exist in India are:

1. Private ownership of means of production;
2. The important role of market mechanism;
3. Presence of a large public sector along with free enterprise;
4. Economic planning

Answer: (c)

The reserve requirement (or cash reserve ratio) is a central bank regulation that sets the minimum reserves each commercial bank must hold (rather than lend out) of customer deposits and notes. These required reserves are normally in the form of cash stored physically in a bank vault (vault cash) or deposits made with a central bank.

The required reserve ratio is sometimes used as a tool in monetary policy, influencing the country’s borrowing and interest rates by changing the number of funds available for banks to make loans with.

The main objective of minimum reserves is the stabilisation of money market rates. Minimum reserves allow credit institutions to smooth out fluctuations in liquidity such as those caused by the demand for banknotes.