money supply, banking & financial institutions section 2 Practice Questions Answers Test with Solutions & More Shortcuts
Money Supply, Banking and Financial Institutions PRACTICE TEST [12 - EXERCISES]
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Question : 11
Which of the following are supply-side factor/s responsible for inflation?
- Increase in exports
- Increase in government expenditure
- Increase in credit creation
a) (ii) & (iii) only
b) (i) & (iii) only
c) (i) only
d) (iii) only
Answer »Answer: (c)
A supply shock is an unexpected event that suddenly changes the supply of a product or commodity, resulting in an unforeseen change in price. Supply shocks can be negative, resulting in a decreased supply, or positive, yielding an increased supply; however, they're often negative.
A supply shock inflation is caused because of the problem (negative supply shock) in the supply of goods and services rather than a change in demand.
If the exports from India increase because foreigners purchased more Indian products then it may result in a shortage in supply of that product in the domestic economy resulting in supply shock inflation.
Because of increased government expenditure, more money reaches the public resulting in increased demand and hence demand-pull inflation.
If there is more money/credit creation in the economy then it results in higher demand in the economy resulting in demand-pull inflation.
Question : 12
Consider the following statements regarding “State Development Loans”
- It is a Government security
- RBI manages the public debt of states
- It can be used under SLR by banks
a) (i) & (ii) only
b) (i) & (iii) only
c) (ii) only
d) All of the above
Answer »Answer: (d)
A Government Security (G-Sec) is a tradeable instrument issued by the Central Government or the State Governments. (G-Secs are issued through auctions conducted by RBI.
Auctions are conducted on the electronic platform called the E-Kuber, the Core Banking Solution (CBS) platform of RBI). G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments. (Govt. issues only debt securities). There are four kinds of government securities.
Government Securities (G-Sec)
- Treasury Bills
- Cash Management Bills
- Dated Securities
- State Dev. Loans
SDLs are allowed to be kept under SLR by banks. SDLs have a maturity of more than one year. In terms of Sec. 21A (1) (b) of the Reserve Bank of India Act, 1934, the RBI may, by agreement with any State Government undertake the management of the public debt of that State.
Accordingly, the RBI has entered into agreements with 29 State Governments and one Union Territory (UT of Puducherry) for management of their public debt.
Question : 13 [SSC SO 2007]
Foreign currency which has a tendency of quick migration is called
a) Gold currency
b) Hot currency
c) Scarce currency
d) Soft currency
Answer »Answer: (b)
Hot money or currency is a term that is most commonly used in financial markets to refer to the flow of funds (or capital) from one country to another in order to earn a short-term profit on interest rate differences and/or anticipated exchange rate shifts.
These speculative capital flows are called “hot money” because they can move very quickly in and out of markets, potentially leading to market instability.
Question : 14 [SSC CGL 2016]
What is the role of “Ombudsman” in a bank?
a) To inspect the internal working of the branches.
b) To monitor the poverty alleviation programmes undertaken by or implemented by the bank.
c) To provide quality and speedy redressal of grievances of customers.
d) To provide suggestions for innovative schemes in the banks.
Answer »Answer: (c)
The Banking Ombudsman Scheme enables an expeditious and inexpensive forum to bank customers for the resolution of complaints relating to certain services rendered by banks.
The Banking Ombudsman Scheme was introduced under Section 35 A of the Banking Regulation Act, 1949 by RBI with effect from 1995.
Question : 15 [UPSC (Pre) 2001]
Since the economic reforms were launched in India, which one of the following statements is true for Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR) of the commercial banks?
a) SLR has been reduced but CRR has been raised
b) Both SLR and CRR have been reduced
c) SLR has been increased but CRR has been reduced
d) Both SLR and CRR have been raised
Answer »Answer: (b)
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Money Supply, Banking and Financial Institutions Shortcuts »
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indian economy MCQ CATEGORIES
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» Introduction to Indian Economy
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» Planning, Economic Development & Five year Plans
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» National Income & Human Development Index
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» Agriculture Sector, Subsidy and Food Processing
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» Industries, Manufacturing & Service Sectors
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» Inclusive growth, Sustainable development and employment
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» Poverty & Unemployment
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» Introduction to Micro Economics
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» Introduction to Macro Economics
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» Macro fundamentals, GDP, Investment, Growth
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» Demand & Supply, Profit Loss, Inflation & Price Index
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» Fiscal Policy, Public Finance and Monetary Policy
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» Money Supply, Banking and Financial Institutions
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» Taxes Types, Methods & Budgeting Process
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» Banking, Security Market & Insurance
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