Which among the following is not the outcome of a decrease in the prime lending rate?
(a) to raise the bank loan
(b) decline in saving rate
(c) decline in productivity
(d) increased demand for consumer products
Solution: (c)
Prime rate or prime lending rate is a term applied in many countries to a reference interest rate used by banks. The term originally indicated the rate of interest at which banks lent to favored customers, i.e., those with high credibility. When these rates are high, demand decreases and output falls to meet the new lower demand. Less output requires fewer worker, driving unemployment higher.
What is USP in the marketing field?
(a) Uninterrupted power supply
(b) Universal standards of production
(c) US Programme based
(d) Exclusive marketing features
Solution: (b)
The Unique Selling Proposition (a.k.a. Unique Selling Point, or USP) is a marketing concept that was first proposed as a theory to understand a pattern among successful advertising campaigns of the early 1940s. It states that such campaigns made unique propositions to the customer and that this convinced them to switch brands. The term was invented by Rosser Reeves of Ted Bates & Company. Today the term is used in other fields or just casually to refer to any aspect of an object that differentiates it from similar objects. The term USP has been largely replaced by the concept of a Positioning Statement.
Which of the following groups suffer the most from inflation?
(a) Debtros
(b) Creditors
(c) Business class
(d) Holders of real assets
Solution: (b)
Inflation, or the general rise of price levels in an economy, has many deleterious effects. It leaves the economy as a whole poorer relative to pre-inflation levels of wealth (individual and societal). Inflation reduces the value of each unit of currency and thus leaves the holder of that currency with lower purchasing power. Generally speaking, those who bene fit from higher inflation are debtors and those who suffer from it- creditors. If one has substantial debt, each dollar one has to repay would be worth less than when it was borrowed. In this way, one pays back less in real terms than one had borrowed. Those who may benefit from higher inflation are people with significant debt.
The main source of long-term credit for a business unit is
(a) sale of stocks and bonds to the public
(b) borrowing from banks
(c) loans from the Government
(d) deposits from the public and financial institutions
Solution: (a)
Companies issue securities called stocks and bonds to raise necessary capital which funds the company’s daily operations and growth. Stock represents fractional ownership in the company. Investors may purchase preferred or common stock. Bonds represent loans of the company to lenders called bondholders. A company decides to sell stock when it needs longterm access to capital. Unlike bond loans, issuing stock to owners called stockholders doesn’t require the company’s repayment of investor principal.
Bank rate is that rate on which–
(a) Any bank lends money to an individual
(b) State Bank of India gives loans to the rural banks
(c) Central Bank of the Country lends money to the commercial banks
(d) Rural bank gives loan to cooperative societies
Solution: (c)
Bank rate, also referred to as the discount rate, is the rate of interest which a central bank charges on the loans and advances to a commercial bank. Repo (Repurchase) rate is the rate at which the central bank lends short-term money to the banks against securities. A reduction in the repo rate will help banks to get money at a cheaper rate. The reverse repo rate is the rate at which the banks park surplus funds with reserve bank, while the repo rate is the rate at which the banks borrow from the central bank.
