Chapter Wise Indian-Economy MCQ’s With Explanation

Today’s TopicMoney and Banking-2

These are most-important and most-expected Questions for IAS Prelims General Studies paper-1 (ECONOMY) of UPSC Civil Service exam.

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Today’s TopicMoney and Banking-2

Q1.Match List – I with List – II correctly, and select your answer using the codes given below.

List – I      List – II
Indian Security press Devas
Security paper mill Nasik
Security printing press Hyderabad
Bank Note Press Hosangabad

 

Codes:

A B C D
a) 1 2 3 4
b) 1 2 4 3
c) 2 4 1 3
d) 2 4 3 1

Ans: D

Explanation: The correct match is:

Indian security Nasik (Maharashtra)
Security paper Mill Hosangabad (Madya Pradesh)
Security printing press Hyderabad (Andra Pradesh)
Banknote press Devas (Madya Pradesh)

1. The office of IRDA (Insurance Regulatory Development Authority) is located in Delhi\Q2.Consider the following statements:

2. The privatization of Insurance sector was done on the basis of recommendations of Malhotra committee.

3. National index of Mumbai stock exchange comprises 30 shares

Select the correct statements with the help of giving codes.

a) 1 only                      b) 2 only                       c) 1, 2 and 3                  d) None of these

Ans: B

Explanation:  The head office of IRDA is located in Hyderabad, not in Delhi. So statement 1 is incorrect. Statement 2 is correct because the National index of Mumbai stock exchange (BSE) comprises 100 shares, not 30 shares. So the correct answer is (b)

Q3.Consider the following statements:

  1. The total no. of a nationalized bank in India is 18.
  2. Scheduled banks have to be registered with SBI.
  3. Dear money means the high rate of Interest.
  4. SDR stands for special drawing rights.

Which statements are correct:

a) 1 and 2                           b) 3 and 4                         c) 2 and 3                     d) All of these

Ans: B

Explanation:  The total number of nationalized banks are 19, not 18 the scheduled banks have to be registered with RBI and not SBI. Hence statements 1 and 2 are incorrect. Statements 3 and 4 are correct. Dear money means high rate of interest and SDR stands for Special Drawing Rights.

Q4.Consider the following with regard to Fiscal policy:

  1. Fiscal policy is the part of government policy which is concerned with raising revenue through taxation.
  2. It’s objective is to achieve desirable income distribution. 4
  3. RBI is responsible to draft fiscal policy.

Select the correct statements with the help of given codes:

a) 1 only                        b) 2 only                         c) 1 and 2 only                  d) 1, 2 and 3

Ans:  C

Explanation:  Government formulates fiscal policy for raising revenue through taxation and with deciding on the amounts and purpose of government spending. Its objectives include – to achieve desirable income distribution, to achieve desirable employment level etc. it is government and not RBI who formulates fiscal policy. So statement 3 is not correct.

Q5. Consider the following with regard to Cash Reserve Ratio (CRR):

  1. Cash reserve ratio (CRR) is the portion of a bank’s deposits that a bank should keep with the RBI in cash form.
  2. The more the CRR, the less the money available for lending by banks to players in the economy.
  3. It is a tool to regulate money flow in the market.

Select the correct statements from the codes given below:

  1. a) 1 only                     b) 1, 2 only                   c) 1, 2 and 3                d) None of these.

Ans:     C

Explanation:    Cash reserve ratio is an instrument through which RBI control liquidity in the economy. It is a portion of bank deposits that a bank should keep with the RBI in cash form.If it is increased the leading power of banks is declined and the flow of liquidity is regulated. So statements 1, 2 and 3 are correct. ,.

Q6. Which of the following are instruments of controlling liquidity in economy:

  1. Cash reserve ratio 2. Statutory Liquidity Ratio
  2. Reserve Repo Ratio 4. Open market operation

Select the correct answer with the help of given codes:

a) 1 and 2                        b) 3 and 4                         c) 1, 2 and 3                        d) 1, 2, 3 and 4

Ans:  D

Explanation:  Reserve bank uses some instruments to control the liquidity in the economy. These instruments strengthen the economy of the country. These instruments are:

  1. Repo Rate
  2. Reserve Repo Rate
  3. Cash Reserve Ratio
  4. Statutory Liquidity Ratio 5. Open market operation  So the correct answer is (d)

Q7. Consider the following statements in regard to repo rate:

  1. Repo rate is the RBI’s lending rate to other banks.
  2. This also means that Repo Rate is the rate at which the RBI money to banks.

Which of the above statements is/are correct?

  1. a) 1 only                        b) 2 only                        c) 1 and 2 both                 d) None of the above.

Ans:  C

Explanation:    Repo rate is the rate at which banks borrow from RBI for short period (overnight Lending). So statement 1 is correct because Repo Rate is the RBI’s lending rate to other banks. Statement (2) is also correct in this reference.

Q8. Consider the following statement with regard to Statutory Liquidity Ratio (SLR):

  1. To meet SLR, commercial banks can use cash only
  2. SLR is maintained by the banks with themselves
  3. SLR restricts the banks leverage in pumping more money into economy.

Which of the statements given above is/are correct?

a) 1, 2 and 3              b) 1 and 3                 c) 2 and 3                    d) 2 only

Ans:     C

Explanation:    Statutory Liquidity Ratio is the reserve money in hands of a bank to run interrupted transactions with their customers. It is a certain percentage of the banks deposit in liquid form. SLR restricts the bank’s leverage to pump more money into economy. So in the regard we see that statement (1) is not correct while statements 2 and 3 are correct. Hence the correct answer is (c)

 

Q9. Match List – I and List –II correctly and select your answer using the codes given below.

 

List – I List – II
National Housing bank          February 1964
Unit trust of India 1          July,  1955
Imperial Bank of India         1921
SBI          July 1988

Codes:

A   B  C  D
a) 1  2 3 4
b) 1  2 4 3
c) 4  1 2 3
d) 4  1 3 2

:Ans:     D
Explanation:    The correct match is:Ans:     D

National housing bank Jul-88
Unit trust of India Feb, 1964
Imperial Bank of india 1921
SBI 1 July, 1955

 

Q10. Match List – I and List –II correctly and select your answer using the codes given below.

List – I List – II
Mahalanobis committee Reginal Rural banks
ML Dantwala Income distribution
SS Tarapore committee Direct Tax
Wanchoo committee Capital Account Convertibility

Codes:

A   B        C        D
a) 2 1 4 3
b) 2 1 3 4
c) 1 2 3 4
d) 2 1 3 4

Ans:     A

Explanation:    The correct match is:

Mahalnobis committee M L Dantwala
S S Tarapore committee Reginal Rural banks
Wanchoo committee Capital account convertibility
Income distribution Direct Tax committee

 

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