Money Supply, Banking & Financial Institutions Section 11 Practice Questions Answers Test With Solutions & More Shortcuts

Question : 1

Consider the following statements regarding ‘ways and means’ advance:

1. It is available for both Central and State governments
2. Government need to pay interest on ways and means advance
3. It is to meet the temporary mismatches of receipts and payments

a) (i) & (iii) only

b) (ii) & (iii) only

c) (i) only

d) All of the above

Question : 2 [UPSC (Pre) 2013]

In the context of Indian economy, ‘Open Market Operations’ refers to

a) lending by commercial banks to industry and trade

b) None of the above

c) purchases and sale of government securities by the RBI

d) borrowing by scheduled banks from the RBI

Question : 3 [UPPCS (Pre) 2003]

Assertion (A):
Devaluation of a currency may promote export.
Reason (R):
The price of the country’s products in the international market may fall due to devaluation.

a) Both (A) and (R) are true, but (R) is not the correct explanation of (A)

b) (A) is false, but (R) is true

c) (A) is true, but (R) is false

d) Both (A) and (R) are true and (R) is the correct explanation of (A)

Question : 4

Which of the following would best describe the role of a merchant bank?

a) To monitor the activities of publicly-list companies

b) To provide borrowing and leading services, primarily to the business sector

c) To act as banker and financial agent to the federal government

d) To provide loans to the corporate sector through receipts of insurance premiums

Question : 5 [SSC CML 2001]

Under flexible exchange rate system, the exchange rate is determined by

a) the price of gold

b) the purchasing power of currencies

c) the Central Bank of the country

d) the forces of demand and supply in the foreign exchange market