money supply, banking & financial institutions section 4 Practice Questions Answers Test with Solutions & More Shortcuts

Question : 1 [HCS (Pre) 2014]

Which of the following is/are treated as artificial currency?

a) SDR

b) Both ADR and GDR

c) GDR

d) ADR

Answer: (a)

Question : 2 [SSC CGL 2016]

Which of the following brings out the ‘Consumer Price Index Number’ for Industrial workers?

a) Commerce Department

b) NITI Aayog

c) RBI

d) The Labour Bureau

Answer: (d)

The Consumer Price Index Numbers for Industrial Workers CPI (IW) are being compiled, maintained and disseminated by the Labour Bureau since its inception in October 1946.

These index numbers are being utilized for fixation and revision of wages and determination of variable Dearness Allowances payable to workers in organized sectors of the economy. These index numbers are compiled by the Bureau on a month to month basis.

Question : 3 [UPSC (Pre) 2018]

Which one of the following best describes the term ‘Merchant Discount Rate’ sometimes seen in news?

a) The amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services

b) The incentive given by the Government to merchants for promoting digital payments by their customers through Point of Sale (PoS) machines and debit cards

c) The charge to a merchant by a bank for accepting payments from his customers through the bank’s debit cards

d) The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank

Answer: (c)

Question : 4

What is the difference between Inflation and Deflation?

  1. Inflation is an increase in the price of goods while Deflation is that state in which the value of money rises and the price of goods and services falls.
  2. Deflation is an increase in the price of goods while Inflation is that state in which the value of money rises and the price of goods and services falls.
  3. Inflation is a state in which the value of money rises and the price of goods and services falls while deflation is an increase in the price of goods.
Choose the correct difference between Inflation and Deflation.

a) 2 only

b) 1 only

c) 3 only

d) 1, 2, 3

Answer: (b)

Inflation is an increase in the price of goods while Deflation is that state in which the value of money rises and the price of goods and services falls.

Question : 5

What are the measures of checking deflation?

  1. Increasing money supply
  2. Promote credit creation by the banks.
  3. Curtailment in taxes so as to increase the purchasing power of the people.
Choose the correct measure.

a) 2 only

b) 1 only

c) 3 only

d) 1, 2, 3

Answer: (d)

Measures of checking deflation are:

  1. Increasing money supply.
  2. Promoting credit creation by the banks.
  3. Curtailment in taxes so as to increase the purchasing power of the people.
  4. Increasing the public expenditure and the employment opportunities in the economy.
  5. Increasing the money supply in circulation by repayment of old public debts.
  6. Providing economic subsidy by the Government to the industrial sector of the econ.

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