money supply, banking & financial institutions section 5 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (b)

Those transactions come under Capital Account (BoP) which creates future obligations/ liabilities or changes in assets/liabilities. For example, loans, shares, deposits etc.

Global Depository Receipts (GDRs) are basically shares issued abroad by a domestic company. International Trade Credit means credit/loan given for trade purposes abroad.

Securities are basically financial assets, so they will always be included in Capital Account.

So, all are part of the Capital Account of BoP

Answer: (d)

Answer: (c)

As per the Fillips curve, if the unemployment starts decreasing (or employment starts increasing) then it results in higher inflation in the economy.

This is because higher employment results in more money in the hands of the people and this more money starts chasing the output in the economy resulting in higher inflation.

Phillips curve says that inflation is dependent on employment and there is an inverse relationship. But it is not vice-versa true. So, if the economy is facing higher inflation then it can’t be said that it will create employment.

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 is introduced under Section 35 A of the Banking Regulation Act, 1949 by RBI with effect from 1995.

The Banking Ombudsman is a senior official appointed by the Reserve Bank of India to redress customer complaints against deficiency in certain banking services like non-payment or inordinate delay in the payment or collection of cheques, drafts, bills etc.

Answer: (a)

Bank Rate is the interest rate at which a nation’s central bank lends money to domestic banks. Often these loans are very short in duration.

Managing the bank rate is a preferred method by which central banks can regulate the level of economic activity.

Regulation of the economy through management of the money supply is referred to as monetary policy.