Exercise : Economy - General Questions
✔ Economy -
General Questions
21.
The Reserve Bank of India (RBI) was established in:
View Answer
Answer: Option A
Explanation:
Explanation:
Step 1: The need for a central bank in India was highlighted by the Hilton Young Commission (Royal Commission on Indian Currency and Finance).
Step 2: Based on its recommendations, the Reserve Bank of India Act, 1934 was passed.
Step 3: The RBI commenced its operations on April 1, 1935, initially as a private shareholders' bank.
Step 2: Based on its recommendations, the Reserve Bank of India Act, 1934 was passed.
Step 3: The RBI commenced its operations on April 1, 1935, initially as a private shareholders' bank.
22.
Which of the following is the "Lender of Last Resort"?
View Answer
Answer: Option C
Explanation:
Explanation:
Step 1: Commercial banks may occasionally face liquidity crises where they cannot meet the withdrawal demands of their depositors.
Step 2: In such situations, when all other sources of funding are exhausted, the central bank steps in to provide emergency funds.
Step 3: In India, the RBI performs this role to ensure the stability of the financial system and prevent bank failures.
Step 2: In such situations, when all other sources of funding are exhausted, the central bank steps in to provide emergency funds.
Step 3: In India, the RBI performs this role to ensure the stability of the financial system and prevent bank failures.
23.
"Repo Rate" is the rate at which:
View Answer
Answer: Option A
Explanation:
Explanation:
Step 1: Repo stands for 'Repurchase Option'.
Step 2: It is the fixed interest rate at which the RBI lends money to commercial banks against the collateral of government securities.
Step 3: It is a key monetary policy tool; increasing the Repo Rate makes borrowing expensive for banks, which helps in controlling inflation.
Step 2: It is the fixed interest rate at which the RBI lends money to commercial banks against the collateral of government securities.
Step 3: It is a key monetary policy tool; increasing the Repo Rate makes borrowing expensive for banks, which helps in controlling inflation.
24.
When RBI increases the "Cash Reserve Ratio" (CRR):
View Answer
Answer: Option B
Explanation:
Explanation:
Step 1: CRR is the percentage of a bank's total deposits (NDTL) that it must keep in cash with the RBI.
Step 2: When the RBI increases the CRR, banks are required to hold more money with the central bank.
Step 3: This reduces the amount of 'loanable funds' available with the banks, thereby decreasing their lending capacity and sucking liquidity out of the economy.
Step 2: When the RBI increases the CRR, banks are required to hold more money with the central bank.
Step 3: This reduces the amount of 'loanable funds' available with the banks, thereby decreasing their lending capacity and sucking liquidity out of the economy.
25.
"Open Market Operations" (OMO) refers to:
View Answer
Answer: Option B
Explanation:
Explanation:
Step 1: OMO is a tool used by central banks to regulate the money supply and interest rates.
Step 2: It involves the simultaneous buying and selling of government securities (G-Secs) in the open market.
Step 3: Buying securities injects liquidity into the banking system, while selling securities absorbs excess liquidity from the system.
Step 2: It involves the simultaneous buying and selling of government securities (G-Secs) in the open market.
Step 3: Buying securities injects liquidity into the banking system, while selling securities absorbs excess liquidity from the system.
26.
Who is the Chairperson of the Monetary Policy Committee (MPC) in India?
View Answer
Answer: Option C
Explanation:
Explanation:
Step 1: The MPC is a statutory committee responsible for fixing the benchmark interest rate (Repo Rate) in India.
Step 2: It consists of six members: three from the RBI and three external members appointed by the Government of India.
Step 3: The Governor of the RBI serves as the ex-officio Chairperson of this committee.
Step 2: It consists of six members: three from the RBI and three external members appointed by the Government of India.
Step 3: The Governor of the RBI serves as the ex-officio Chairperson of this committee.
27.
"Fiat Money" is money that:
View Answer
Answer: Option C
Explanation:
Explanation:
Step 1: Fiat money is a type of currency that is not backed by a physical commodity like gold or silver.
Step 2: It has no intrinsic value (the paper it's printed on is worth very little).
Step 3: It derives its value from government decree (fiat) and the trust that people have in the issuing authority to accept it as legal tender.
Step 2: It has no intrinsic value (the paper it's printed on is worth very little).
Step 3: It derives its value from government decree (fiat) and the trust that people have in the issuing authority to accept it as legal tender.
28.
The "M1" measure of money supply includes:
View Answer
Answer: Option A
Explanation:
Explanation:
Step 1: M1 is the most liquid measure of money supply, often called 'Narrow Money'.
Step 2: It includes components that can be immediately used for transactions.
Step 3: Specifically, M1 = Currency with the public + Demand deposits with the banking system (Current and Savings accounts) + 'Other' deposits with the RBI.
Step 2: It includes components that can be immediately used for transactions.
Step 3: Specifically, M1 = Currency with the public + Demand deposits with the banking system (Current and Savings accounts) + 'Other' deposits with the RBI.
29.
Statutory Liquidity Ratio (SLR) is maintained by banks in the form of:
View Answer
Answer: Option C
Explanation:
Explanation:
Step 1: SLR is a requirement where banks must maintain a certain percentage of their Net Demand and Time Liabilities (NDTL) in liquid assets.
Step 2: Unlike CRR (which is kept with the RBI), SLR is maintained by the banks themselves.
Step 3: These liquid assets can be held in the form of cash, gold, or unencumbered government-approved securities.
Step 2: Unlike CRR (which is kept with the RBI), SLR is maintained by the banks themselves.
Step 3: These liquid assets can be held in the form of cash, gold, or unencumbered government-approved securities.
30.
The "Nationalization" of 14 major commercial banks in India took place in:
View Answer
Answer: Option B
Explanation:
Explanation:
Step 1: Before 1969, most large banks in India were privately owned and focused on lending to large industries.
Step 2: To ensure credit reached the 'priority sectors' like agriculture and small-scale industries, the Indira Gandhi government decided to nationalize them.
Step 3: On July 19, 1969, 14 major commercial banks with deposits over Rs. 50 crore were brought under government ownership.
Step 2: To ensure credit reached the 'priority sectors' like agriculture and small-scale industries, the Indira Gandhi government decided to nationalize them.
Step 3: On July 19, 1969, 14 major commercial banks with deposits over Rs. 50 crore were brought under government ownership.