Chapter Wise Indian Economy MCQ’s With Explanation

Today’s Topic: Money and Banking-3

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Today’s Topic: Money and Banking-3

 

Q1. Consider the following statements:

1. NABARD was established on the recommendation of Shivaraman Committee.

2. SBI performs the duties of a central bank.

3. RBI is authorized to issue coins in India.

Select the correct statements with the help of codes given below:

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

Ans:     A

Explanation:    NABARD (National Bank for Agriculture and Rural Development) was established on the recommendation of Shivaraman Committee. So statement 1 correct. Statement 2 and 3 are incorrect. The duties of central banks are performed by RBI, not by SBI, coins are issued by the ministry of finance, not by RBI.

Q2. Match the List – I with List – II correctly and select your answer using the codes given below.

List – I (Banks)            List – II (Year of Establishment)

a) IDBI                               1982

b) IFCI                               1948

c) SIDBI                            1964

d) EXIM                             1990

Codes:

A         B          C          D

a) 1         2          3          4

b) 1         2          4          3

c) 3          2          1         4

d) 3         2          4          1

Ans:     D

Explanation:    Bank and their years of establishments

IDBI                –           1964

IFCI                 –           1948

SIDBI              –           1990

EXIM               –           1982

Q3. Tick mark which is incorrect about inflation.

  1. Inflation indicates the rise in the price of a basket of commodities on a point to point basis.
  2. The inflation in India is calculated on the basis of the wholesale price index.
  3. For some commodities, retail prices are also considered for measurement of inflation.
  4. Inflation rate going down does not mean prices are declining.

Select the correct answer with the help of the codes given below:

a) 1 only                b) 2 only                c) 4 only                      d) 1 and 4

Ans:     C

Explanation:    Statement 1, 2 and 3 are correct but statement 4 is incorrect because inflation is a condition in which the value of the country of the currency goes down and thus the prices of commodities are increased. If the inflation declines the prices of commodities also decline.

Q4. Consider the following statements in the context of ‘future trading’:

  1. It is nothing but a trade between any two stock exchange wherein it is declined to purchase the stuck of each other on a fixed price throughout the year.
  2. It is an agreement between two parties to buy or sell an underlying asset in the future at a predetermined price.
  3. It is an agreement between a stock exchange that they will not trade the stocks of each other under any circumstances in future or for a given period of time.

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

Ans:     B

Explanation:    Future trading is an agreement between two parties to buy and sell underlying asses in the future at a predetermined price. As the price is fixed and predetermined is does not fluctuate according to the market rules.

Q5. Consider the following statements:

  1. Mumbai stock exchange is the oldest exchange of India.
  2. A national stock exchange was established in 1992.
  3. UTI Bank is now known as Axis Bank.

Select the correct answer from the codes given below:

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

Ans:     C

Explanation:    Mumbai stock exchange is the oldest exchange of India. It was established in 1875. A national stock exchange was established in 1992 on the basis of a recommendation of ferwani Committee. UTI is now known as Axis Bank since July 2007. Thus correct answer is (c).

Q6. Consider the following statements:

  1. Inflation in India is measured by the cost of Living Index (CLI)
  2. RBI is the Capital Market Regulator.
  3. Devaluation usually causes the internal prices to remain unchanged.

Which statements are correct?

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

Ans:     C

Explanation:    Inflation India is measured by wholesale price index (WPI), not by the cost of living index. So statement 1 is incorrect. A capital market is regulated by SEBI, not by RBI, thus statement 2 is also incorrect. Statement 3 is correct because devaluation usually causes the internal prices to remain unchanged.

Q7. Consider the following statements with reference to ‘Hot Money’:

  1. The term is used for fresh currency notes issued by the RBI
  2. It is the fund which flows in the market to take advantage of high-interest rate.
  3. It is the fund which is thrown in the market to create an imbalance in the stock markets.

Select the correct answer:

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

Ans:     B

Explanation:    Hot money is the fund which flows in the market to take advantage of the high-interest rate. It is volatile money which comes easily but can also go out easily.

 Q8. In the parlance of economy/commerce, what is ‘gilt-edged market’?

a) Gold and silver market                                                             b) Industrial securities market

c) Market of safe (such as government) securities                      d) Market of software technology

Ans:     C

Explanation:    Gilt-edged Market – A place where high-grade bonds (guilt Edged) are sold which have the ability to earn a comfortable profit over a period of years and pay its bondholders their interest without interruption. So the correct answer is (c)

Q9. Match the list-I with list-II correctly and select your answer using the codes given below:

List – I (Financial institution)               list – II (Year of establishment)

a) RBI 2 Oct                                              1975

b) LIC                                                        1982

c) RRB Sept                                              1956

d) NABARD 1 April                                    1935

Codes:

A         B          C          D

a) 4         3          2          1

b) 4          3          1          2

c) 1          2          3          4

d) 1          2          4          3

Ans:     B

Explanation:

Reserve Bank of India (RBI)                                            –           1 April 1935

Life Insurance corporation (LIC)                                         –           September 1956

Regional Rural Banks (RRB)                                              –           2 October, 1975

National bank for Agriculture and Rural Development       –           1982

Q10. Which one of the following department published “citizens guide to fight corruption”:

a) Ministry of Family welfare                     b) Consumer Cooperative commission

c) Central vigilance commission                d) Transparency international.

Ans:     C

Explanation:    The central vigilance commission has brought out “the citizens guide fight corruption” the guide possibly the first big step on remedying this evil which is threatening to swallow us. We have had enough of debates on TV channels, a large number of articles have appeared in almost all newspaper giving the anatomy and biochemistry of corruption.

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