INSIGHTS STATIC QUIZ 2020 - 21
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Question 1 of 5
1. Question
Consider the following statements regarding First Five-year Plan (FYP) in India.
- The First Five-year Plan mainly focused on development of the primary sector.
- The First Five-year Plan was followed by the Bombay Plan which became the basis for the Second Five Year Plan.
Which of the above statements is/are correct?
Correct
Solution: a)
The First Five-year Plan was launched in 1951 which mainly focused in development of the primary sector. The First Five-Year Plan was based on the Harrod–Domar model with few modifications.
The Bombay Plan is the name commonly given to a World War II-era set of proposals for the development of the post-independence economy of India. The plan was published in 1944/1945.
Second Plan (1956–1961).
Incorrect
Solution: a)
The First Five-year Plan was launched in 1951 which mainly focused in development of the primary sector. The First Five-Year Plan was based on the Harrod–Domar model with few modifications.
The Bombay Plan is the name commonly given to a World War II-era set of proposals for the development of the post-independence economy of India. The plan was published in 1944/1945.
Second Plan (1956–1961).
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Question 2 of 5
2. Question
Printing currency is usually the last resort for the government in managing its deficit. This is because
- Government expenditure using this new money boosts incomes and raises private demand in the economy, thus leading to inflation.
- Excess supply of rupee will cause its depreciation.
Select the correct answer code:
Correct
Solution: c)
Government expenditure using this new money boosts incomes and raises private demand in the economy. Thus, it fuels inflation.
Easy monetary policy and high inflation are two of the leading causes of currency depreciation.
Incorrect
Solution: c)
Government expenditure using this new money boosts incomes and raises private demand in the economy. Thus, it fuels inflation.
Easy monetary policy and high inflation are two of the leading causes of currency depreciation.
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Question 3 of 5
3. Question
If the Cash Reserve Ratio (CRR) is increased, it may lead to which of the following?
- Lesser availability of loanable funds with the banks
- Immediate foreign institutional investment flows in the economy
- Reduction in fiscal deficit of the government
Select the correct answer code:
Correct
Solution: a)
CRR is one of the major weapons in the RBI’s arsenal that allows it to maintain a desired level of inflation, control the money supply, and also liquidity in the economy. The lower the CRR, the higher liquidity with the banks, which in turn goes into investment and lending and vice-versa. Higher CRR can also negatively impact the economy as lesser availability of loanable funds, in turn, slows down investment. It thereby reduces the supply of money in the economy.
Fiscal deficit depends on government’s receipts and expenditures. CRR does not have a direct bearing on fiscal deficit.
Incorrect
Solution: a)
CRR is one of the major weapons in the RBI’s arsenal that allows it to maintain a desired level of inflation, control the money supply, and also liquidity in the economy. The lower the CRR, the higher liquidity with the banks, which in turn goes into investment and lending and vice-versa. Higher CRR can also negatively impact the economy as lesser availability of loanable funds, in turn, slows down investment. It thereby reduces the supply of money in the economy.
Fiscal deficit depends on government’s receipts and expenditures. CRR does not have a direct bearing on fiscal deficit.
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Question 4 of 5
4. Question
The Reserve Bank of India monitors which of following indicators in the banking sector?
- Cash flow with banks
- Credit activities of banks
- Spurious transactions
Select the correct answer code:
Correct
Solution: d)
Banks maintain a minimum cash balance out of the deposits they receive. The RBI monitors the banks in actually maintaining cash balance.
Similarly, the RBI sees that the banks give loans not just to profit-making businesses and traders but also to small cultivators, small scale industries, small borrowers etc.
Banks need to report spurious transactions to Financial Intelligence Unit. The norms are regulated by RBI.
Incorrect
Solution: d)
Banks maintain a minimum cash balance out of the deposits they receive. The RBI monitors the banks in actually maintaining cash balance.
Similarly, the RBI sees that the banks give loans not just to profit-making businesses and traders but also to small cultivators, small scale industries, small borrowers etc.
Banks need to report spurious transactions to Financial Intelligence Unit. The norms are regulated by RBI.
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Question 5 of 5
5. Question
Which among the following is/are likely to result in current account surplus of Balance of Payments (BoP)?
- Steep fall in global crude oil prices
- Increase in the remittances received from abroad.
- External commercial borrowing
Select the correct answer code:
Correct
Solution: b)
External Commercial borrowing is a part of Capital account.
Incorrect
Solution: b)
External Commercial borrowing is a part of Capital account.
