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]
money supply, banking & financial institutions section 1
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money supply, banking & financial institutions section 12
Question : 36
The basic aim of Lead Bank Scheme is that:
a) big banks should try to open offices in each district
b) individual banks should adopt particular districts for intensive development
c) there should be stiff competition among the various nationalized banks
d) all the banks should make intensive efforts to mobilize deposits
Answer »Answer: (b)
The basic aim of Lead Bank scheme is that the bank should adopt particular districts for intensive development by offering loans and banking services.
Question : 37
If the 'Real Effective Exchange Rate' of a country appreciates then which of the following will be true:
a) Export competitiveness will reduce
b) Imports will decrease
c) Exports will become more competitive
d) Will have no impact on trade
Answer »Answer: (a)
Suppose Nominal Exchange Rate is $1 = Rs.60
Burger Price - India : Rs. 30, US : $1 Whether India will export burgers to US or not depends on three parameters/prices
Price of Burger in US (directly proportional, i.e. if it increases, exports to US will increase)
Price of Burger in India (indirectly proportional, i.e. if it increases exports to the US $ will decrease)
Nominal Exchange Rate (directly proportional, i.e. if it increases exports to US $ will increase)
And all the three parameters are captured in Real Exchange Rate
Real Exchange Rate = $\text"Price in US X Nominal Exchange Rate"/\text"Price in India"$
= ${1 X 60}/30$ = 2
Till Real Exchange Rate > 1, India will continue to export its burgers to the US. If Real Exchange Rate becomes equal to 1, then export & import will stop. If Real Exchange Rate is < 1, then the US will start exporting its burgers to India. So Real Exchange Rate determines export competitiveness between two countries.
But if India wants to measure its export competitiveness with all its trading partners then it calculates the Real Effective Exchange Rate which is a weighted average (weights being the shares in foreign trade with respective countries) of the Real Exchange Rates of its different trading partners.
If the real effective exchange rate appreciates that means it moves from 2 to 1 (in the example above) which means the export competitiveness of Indian products will start reducing.
Question : 38
Which among the following is a correct definition of currency drain?
a) A currency drain is an export of the domestic currency
b) A currency drain is the currency holding by a parallel economy
c) A currency drain is an increase in currency held outside the banks.
d) None of these
Answer »Answer: (c)
Question : 39
Which among the following is the only correct statement?
a) Money market meets long term financing needs
b) Ways and means advances given by RBI are nowhere related to State’s revenue
c) Recession in industrial sector in India is normally due to fall in exports
d) Exchange rate is fixed by RBI
Answer »Answer: (b)
IMPORTANT indian economy mcq EXERCISES
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Banking & Financial Institutions Features GK MCQ Quiz PDF »
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499+ Indian Monetary Aggregates & Money Supply GK MCQ PDF »
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Top 500+ Money & Banking Questions And Answers Test PDF »
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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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