money supply, banking & financial institutions section 7 Practice Questions Answers Test with Solutions & More Shortcuts
Money Supply, Banking and Financial Institutions PRACTICE TEST [12 - EXERCISES]
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Question : 31
Which of the following statements are true regarding the Monetary Policy Committee (MPC)?
- It has the authority to decide repo rate, CRR, SLR
- Its decision is binding on RBI
a) (ii) only
b) Both (i) & (ii)
c) (i) only
d) Neither (i) nor (ii)
Answer »Answer: (a)
MPC has the authority to decide only the repo rate and not CRR & SLR or other things. Its decision of repo rate is binding on RBI.
Question : 32
Consider the following statements:
- Debt overhang refers to a debt burden so large that an entity cannot take on additional debt to finance future projects.
- Debt trap is a situation in which it becomes difficult or impossible to repay the debt
a) (ii) only
b) Both (i) & (ii)
c) (i) only
d) Neither (i) nor (ii)
Answer »Answer: (b)
Question : 34 [SSC CGL 2016]
Open Market Operations refer to __________ .
a) Purchase and sale of Government securities by RBI
b) Deposit mobilisation
c) Borrowings by Scheduled banks from RBI
d) Lending by Commercial banks to industry
Answer »Answer: (a)
Open Market Operation (OMO) refers to the buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system. A central bank uses OMO as the primary means of implementing monetary policy.
Question : 35
Which of the following are the reasons that make a moderate level of inflation good for the economy?
- It increases consumption levels
- It keeps businesses profitable
- It induces people to save more
a) (i) & (ii) only
b) (iii) only
c) (ii) only
d) All of the above
Answer »Answer: (d)
In the case of low and moderate inflation, people are willing to save money and put in bank deposits because banks offer deposit rates higher than inflation rates.
People are willing to sign long term contracts (linked with inflation index) in money terms because they are confident that the relative prices of goods and services they buy and sell will not get too far out of line and it helps in promoting business.
As the prices are increasing, people are also willing to consume because if they postpone their consumption, they will have to spend more on consumption at a future date.
IMPORTANT indian economy mcq EXERCISES
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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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