money supply, banking & financial institutions section 8 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (a)

Prime rate or prime lending rate is a term applied in many countries to a reference interest rate used by banks. The term originally indicated the rate of interest at which banks lent to favoured customers,

i.e., those with high credibility. When these rates are high, demand decreases and output falls to meet the new lower demand.

Less output requires fewer workers, driving unemployment higher.

Answer: (c)

In all RBI related documents, it is written that RBI acts as a lender of last resort for banks.

But in the case of the IL&FS crisis in 2018, where it defaulted on loan papers, Mr Viraj Acharya, the ex-Deputy Governor of RBI clarified that RBI can act as lender of last resort for NBFCs also.

All NBFCs are not registered or regulated by RBI. Some NBFCs are regulated by SEBI, IRDAI etc. also

Answer: (a)

Bank Rate is the interest rate at which a nation's central bank lends money to domestic banks. Managing the bank rate is a preferred method by which central banks can regulate the level of economic activity.

Answer: (d)

The money supply is defined as the stock of money in circulation among the public. So, money lying with the government, RBI and interbank deposits are not considered as money supply.

Answer: (d)

An angel investor is a person who invests in highly risky companies, typically before those companies have any revenue or profits. Angel investors are often among an entrepreneur's family and friends and invest in small start-ups and entrepreneurs.

Angel investors provide more favourable terms compared to other lenders since they usually invest in the entrepreneur starting the business rather than the viability of the business.

Angel investors are focused on helping start-ups take their first steps, rather than the possible profit they may get from the business. Fund-raising with angel investors is typically done more casually, using networking and crowd funding platforms.

Essentially, angel investors are the opposite of venture capitalists. Angel investors typically use their own money, unlike venture capitalists who take care of pooled money from many other investors and place them in a strategically managed fund.

Angel Investment in India is regulated by the Securities and Exchange Board of India (SEBI) under Category I of Alternative Investment Funds (AIF).