(1) money value of goods and services produced in a country during a year.
(2) money value of stocks and shares of a country during a year.
(3) money value of capital goods produced by a country during a year.
(4) money value of consumer goods produced by a country during a year.
Solution: (3)
National Income is one of the basic concepts in macroeconomics. National Income means the total income of the nation. The aggregate economic performance of the whole economy is measured by the national income data. National Income refers to the money value of all final goods and services produced by the normal residents of a country while working both within and outside the domestic territory of a country in an accounting year. National Income also includes net factor income from abroad. Symbolically, Y = PG + PS, where, Y = National Income; P = Price; G = Goods; and S = Service.
A Scheduled Bank is one which is included in the
(1) II Schedule of Banking Regulation Act
(2) II Schedule of Reserve Bank of India Act
(3) II Schedule of Constitution
(4) II Schedule of Parliament Order
Solution: (2)
Commercial banks are classified into two: (a) Scheduled banks and (b) other banks. A scheduled bank is one which is included in the second schedule of Reserve Bank of India Act, 1934. A scheduled bank should comply with the following terms: (i) It must have paid up capital and reserves as specified; and (ii) the activities to be carried out should not be detrimental to the interests of the depositors; and (iii) it should be incorporated under the Companies Act, 1956, that is, it should not be the sole trader for a partnership firm or business organization.
Which image is on the back of 20 Rs. note of Mahatma Gandhi (New) series?
(1) Red Fort
(2) Ellora Caves
(3) Sanchi Stupa
(4) Rani ki Vav
Solution: (2)
In April 2019, RBI issued new Rs. 20 currency notes in the Mahatma Gandhi (New) series. The base colour of the new note is Greenish Yellow. The new twenty rupees denomination has the motif of Ellora Caves on the reverse side of the note. The dimension of the banknote will be 63 mm x 129 mm. Similarly,
Rs. 10 – Sun Temple of Konark Rs. 50 – Hampi with Chariot Rs. 100 – Rani Ki Vav Rs. 200 – Sanchi Stupa Rs. 500 – Red Fort with Indian Flag
What are “Open Market Operations”?
(1) Activities of SEBI registered brokers
(2) Selling of currency by the RBI
(3) Selling of gilt-edged securities by the Government
(4) Sale of shares by FIIs
Solution: (3)
An open market operation (also known as OMO) is an activity by a central bank to buy or sell government bonds on the open market. A central bank uses them as the primary means of implementing monetary policy. The usual aim of open market operations is to control the short term interest rate and the supply of base money in an economy, and thus indirectly control the total money supply. This involves meeting the demand of base money at the target interest rate by buying and selling government securities, or other financial instruments. Monetary targets, such as inflation, interest rates, or exchange rates, are used to guide this implementation.
In estimating the budgetary deficit, the official approach in India is to exclude
(1) long term borrowing from the market
(2) borrowings from the Reserve Bank of India
(3) borrowing from Reserve Bank in the form of ways and means advance
(4) drawing down of the cash balance
Solution: (4)
When the government expenditure exceeds revenues, the government is having a budget deficit. Thus the budget deficit is the excess of government expenditures over government receipts (income). When the government is running a deficit, it is spending more than it’s receipts. Budgetary Deficit is the difference between all receipts and expenditure of the government, both revenue and capital. This difference is met by the net addition of the treasury bills issued by the RBI and drawing down of cash balances kept with the RBI. So when it is estimated, drawing down of cash balances is excluded.
Which of the following is an open market operation of the RBI ?
(1) Buying and selling of shares
(2) Trading in securities
(3) Transactions in gold
(4) Lending to commercial banks
Solution: (2)
Open Market Operations (OMOs) are the market operations conducted by the Reserve Bank of India by way of sale/ purchase of Government securities to/ from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis. When the RBI feels there is excess liquidity in the market, it resorts to sale of securities thereby sucking out the rupee liquidity. Similarly, when the liquidity conditions are tight, the RBI will buy securities from the market, thereby releasing liquidity into the market. The two traditional type of OMO’s used by RBI are: Outright purchase (PEMO): Is outright buying or selling of government securities; and Repurchase agreement (REPO): Is short term, and are subject to repurchase.
During which Five-Year Plan did India lay down the objective of the need to ensure environmental sustainability of the development strategy ?
(1) 6th Five Year Plan
(2) 7th Five Year Plan
(3) 8th Five Year Plan
(4) 9th Five Year Plan
Solution: (4)
The Ninth Plan recognised the integral link between rapid economic growth and the quality of life of the mass of the people. Ensuring environmental sustainability of the development process through social mobilisation and participation of people at all level was one of the specific objectives of the Ninth Plan as approved by the National Development Council. In the Ninth Plan document, policies and programmes during the Eighth Plan period were reviewed, shortcomings identified and new policy framework suggested overcoming the shortcomings and ensuring sustainability of the development process not only in economic terms but also in terms of social and environmental factors
Reserve Bank of India keeps some securities against notes. These securities are always less in comparison to
(1) Gold and foreign bonds only
(2) Gold, foreign bonds and Government bonds only
(3) Government bonds and Gold only
(4) Gold and other precious metals only
Solution: (2)
Statutory Liquidity Ratio refers to the amount that the commercial banks require to maintain in the form gold or government approved securities before providing credit to the customers. Here by approved securities we mean, bond and shares of different companies. Statutory Liquidity Ratio is determined and maintained by the Reserve Bank of India in order to control the expansion of bank credit. Statutory liquidity ratio is the amount of liquid assets such as precious metals (Gold) or other approved securities, that a financial institution must maintain as reserves other than the cash. In a growing economy banks would like to invest in stock market, not in Government Securities or Gold as the latter would yield less returns. One more reason is long term Government Securities (or any bond) are sensitive to interest rate changes. But in an emerging economy interest rate change is a common activity.
The system of issuing and monitoring of money in the market is known as–
(1) Proportional reserve ratio
(2) Fixed reserve ratio
(3) Minimum reserve ratio
(4) Floating reserve ratio
Solution: (3)
The reserve requirement (or cash reserve ratio) is a central bank regulation that sets the minimum reserves each commercial bank must hold (rather than lend out) of customer deposits and notes. These required reserves are normally in the form of cash stored physically in a bank vault (vault cash) or deposits made with a central bank. The required reserve ratio is sometimes used as a tool in monetary policy, influencing the country’s borrowing and interest rates by changing the amount of funds available for banks to make loans with. The main objective of minimum reserves is the stabilisation of money market rates. Minimum reserves allow credit institutions to smooth out fluctuations in liquidity such as those caused by the demand for banknotes.
The Government of India made it obligatory on the part of all commercial banks that they should give some cash amount while purchasing Government bonds. What would you call this?
(1) Statutory Liquidity Ratio
(2) Cash Reserve Ratio
(3) Minimum Reserve Ratio
(4) Floating Reserve Ratio
Solution: (1)
Statutory liquidity ratio is the amount of liquid assets such as precious metals (Gold) or other approved securities, which a financial institution must maintain as reserves other than the cash. The statutory liquidity ratio is a term most commonly used in India. The objectives of SLR are to restrict the expansion of bank credit. They serve to augment the investment of the banks in government securities and ensure solvency of banks.
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