Insights Static Quiz -103, 2018
Economics
INSIGHTS IAS QUIZ ON STATIC SYLLABUS - 2018
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Question 1 of 5
1. Question
Consider the following statements
- Base rate system is used by banks for calculating their lending rates
- Marginal Cost of Funds Rate is calculated through a set formula
Which of the above is are correct
Correct
Answer – b
- Base rate is the minimum interest rate at which a bank can lend. It is calculated according to the RBI guidelines. It differs from one bank to another.
- Marginal Cost of Funds Rate refers to the minimum interest rate of a bank below which it cannot lend. It is calculated on the basis of marginal cost of arranging one more rupee to the prospective borrower
- Currently, the banking lending rates are determined by the MCLR or marginal cost of funds lending rate introduced in 2016
- Both the base rate and the MCLR were internally determined by the banks themselves. However, the major difference between the two was that calculation of base rate was done as the bank saw fit while MCLR was to be calculated through a set formula.
Incorrect
Answer – b
- Base rate is the minimum interest rate at which a bank can lend. It is calculated according to the RBI guidelines. It differs from one bank to another.
- Marginal Cost of Funds Rate refers to the minimum interest rate of a bank below which it cannot lend. It is calculated on the basis of marginal cost of arranging one more rupee to the prospective borrower
- Currently, the banking lending rates are determined by the MCLR or marginal cost of funds lending rate introduced in 2016
- Both the base rate and the MCLR were internally determined by the banks themselves. However, the major difference between the two was that calculation of base rate was done as the bank saw fit while MCLR was to be calculated through a set formula.
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Question 2 of 5
2. Question
Consider the following statements with respect to comparison of Treasury bills and Certificate of Deposits
- Both are issued against government securities
- Both are forms of deposits
Select the right code
Correct
Answer – d
- Treasury Bills are government securities (debt instruments) used by the government to raise money for a shorter period of time i.e less than a year. Therefore, they are categorized as money market instruments. T-bills do not pay interest but are rather sold at a discounted rate and can be redeemed at the face value at maturity
- Certificate of Deposits is a money market instrument issued in demat form or as promissory notes by banks against funds deposited at the banks. they can either be offered at a discounted rate or with a floating rate (to be determined by the market forces).
Incorrect
Answer – d
- Treasury Bills are government securities (debt instruments) used by the government to raise money for a shorter period of time i.e less than a year. Therefore, they are categorized as money market instruments. T-bills do not pay interest but are rather sold at a discounted rate and can be redeemed at the face value at maturity
- Certificate of Deposits is a money market instrument issued in demat form or as promissory notes by banks against funds deposited at the banks. they can either be offered at a discounted rate or with a floating rate (to be determined by the market forces).
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Question 3 of 5
3. Question
Which of the following is considered as part of external sector of a nation’s economy
- Current account
- Capital account
- Import
- External debt
Select the right code
Correct
Answer – d
All economic activities of an economy which take place in foreign currency fall in the external sector such as export, import, foreign investment, external debt, current account, capital account, balance of payment, etc.
Incorrect
Answer – d
All economic activities of an economy which take place in foreign currency fall in the external sector such as export, import, foreign investment, external debt, current account, capital account, balance of payment, etc.
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Question 4 of 5
4. Question
Arrange the following components of India’s forex reserves according to their proportion in ascending order
- Foreign currency
- Gold
- Special Drawing Rights at IMF
Select the right code
Correct
Answer – a
By December 2016, India’s forex reserves were ate comfortable levels of US$ 360 billion—with a rise of US$ 10 billion since January 2016. This included the gold reserves of US$ 21 billion and SDRs of US$ 5.6 billion (inclusive of reserve tranche of US$ 1.3 billion), as per the Economic Survey 2016-17.
Incorrect
Answer – a
By December 2016, India’s forex reserves were ate comfortable levels of US$ 360 billion—with a rise of US$ 10 billion since January 2016. This included the gold reserves of US$ 21 billion and SDRs of US$ 5.6 billion (inclusive of reserve tranche of US$ 1.3 billion), as per the Economic Survey 2016-17.
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Question 5 of 5
5. Question
If Central bank intervenes to reduce volatility in forex market, then forex reserves are likely to
Correct
Answer – a
RBI targets neither a particular exchange rate nor foreign exchange reserves, and maintains such interventions by it to just reduce volatility in the forex market. But in the process of supporting weakening rupee, RBI needs to buy dollar, ultimately, leading to higher forex buid-ups. The Chief Economic Advisor of the Finance Ministry, however, clearly stated the kind of reserve accretion the government is looking at. Citing the example of China, the Economic Survey 2014–15 said India could target foreign exchange reserves of US$750 billion to $1 trillion.
Incorrect
Answer – a
RBI targets neither a particular exchange rate nor foreign exchange reserves, and maintains such interventions by it to just reduce volatility in the forex market. But in the process of supporting weakening rupee, RBI needs to buy dollar, ultimately, leading to higher forex buid-ups. The Chief Economic Advisor of the Finance Ministry, however, clearly stated the kind of reserve accretion the government is looking at. Citing the example of China, the Economic Survey 2014–15 said India could target foreign exchange reserves of US$750 billion to $1 trillion.
