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All questions of Introduction to Indian Financial System for B Com Exam
What is the primary function of money supply in an economy?- a)To ensure price stability.
- b)To stimulate investment.
- c)To promote international trade.
- d)To achieve balanced economic growth.
Correct answer is option 'D'. Can you explain this answer?
a)
To ensure price stability.
b)
To stimulate investment.
c)
To promote international trade.
d)
To achieve balanced economic growth.
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Universal Academy answered |
Money supply serves as a crucial factor for achieving balanced economic growth by facilitating transactions, investments, and overall economic activities. It helps in maintaining stability and preventing both inflation and deflation.
What is the role of the Reserve Bank of India (RBI) in the Indian financial system?- a)To provide investment banking services.
- b)To govern the cooperative banking sector.
- c)To protect the interests of investors in securities.
- d)To act as the central bank and regulate commercial banks.
Correct answer is option 'D'. Can you explain this answer?
a)
To provide investment banking services.
b)
To govern the cooperative banking sector.
c)
To protect the interests of investors in securities.
d)
To act as the central bank and regulate commercial banks.
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Universal Academy answered |
The role of the Reserve Bank of India (RBI) in the Indian financial system, as mentioned in the text, is "to act as the central bank" and regulate commercial banks, among other responsibilities.
How does the drainage of currency to the public during the deposit creation process affect the money multiplier?- a)It increases the money multiplier.
- b)It has no effect on the money multiplier.
- c)It decreases the money multiplier.
- d)It changes the currency-deposit ratio.
Correct answer is option 'C'. Can you explain this answer?
a)
It increases the money multiplier.
b)
It has no effect on the money multiplier.
c)
It decreases the money multiplier.
d)
It changes the currency-deposit ratio.
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Universal Academy answered |
The drainage of currency from banks to the public during the deposit creation process reduces the value of the money multiplier, as it decreases the extent of expansion in demand deposits.
What is the term for the total sum of money available to the public in an economy at a specific point in time?- a)Money flow
- b)Currency circulation
- c)Money supply
- d)Economic turnover
Correct answer is option 'C'. Can you explain this answer?
a)
Money flow
b)
Currency circulation
c)
Money supply
d)
Economic turnover
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Universal Academy answered |
Money supply refers to the total stock of monetary media of exchange available for use by the public in an economy at a specific time. It encompasses both currency and demand deposits.
What is the primary role of financial institutions in the Indian financial system?- a)To provide investment opportunities for individuals.
- b)To regulate the stock market.
- c)To increase the efficiency of resource use.
- d)To control the flow of foreign investments.
Correct answer is option 'C'. Can you explain this answer?
a)
To provide investment opportunities for individuals.
b)
To regulate the stock market.
c)
To increase the efficiency of resource use.
d)
To control the flow of foreign investments.
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Universal Academy answered |
The primary role of financial institutions in the Indian financial system, as mentioned in the text, is "to increase the efficiency of resource use," which includes evaluating investments and monitoring borrowers to improve resource allocation.
What was the main goal of liberalization in the Indian financial system in 1992-93?- a)To increase government control over financial institutions.
- b)To reduce competition among financial institutions.
- c)To make the financial system more market-oriented and efficient.
- d)To restrict foreign investments in India.
Correct answer is option 'C'. Can you explain this answer?
a)
To increase government control over financial institutions.
b)
To reduce competition among financial institutions.
c)
To make the financial system more market-oriented and efficient.
d)
To restrict foreign investments in India.
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Bank Exams India answered |
The main goal of liberalization in the Indian financial system in 1992-93, as per the text, was "to make the financial system more market-oriented and efficient," which involved various reforms and deregulation measures.
What role does the high-powered money (H) play in determining money supply?- a)It directly determines the money multiplier.
- b)It determines the size of currency reserves.
- c)It is responsible for the creation of demand deposits.
- d)It influences the total money supply.
Correct answer is option 'D'. Can you explain this answer?
a)
It directly determines the money multiplier.
b)
It determines the size of currency reserves.
c)
It is responsible for the creation of demand deposits.
d)
It influences the total money supply.
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Bank Exams India answered |
High-powered money (H) influences the total money supply indirectly through its relationship with the money multiplier and the cash reserve ratio.
What is the term used to describe the degree to which money supply expands in response to an increase in high-powered money?- a)Reserve power
- b)Currency leverage
- c)Money multiplier
- d)Deposit accelerator
Correct answer is option 'C'. Can you explain this answer?
a)
Reserve power
b)
Currency leverage
c)
Money multiplier
d)
Deposit accelerator
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Universal Academy answered |
The money multiplier is the measure of how much the money supply expands for a given increase in high-powered money. It depends on the cash reserve ratio of banks and the currency-deposit ratio of the public.
What is the primary reason for distinguishing various measures of money supply based on their functions?- a)To simplify monetary policy decisions.
- b)To assess the role of banking institutions.
- c)To predict economic growth accurately.
- d)To analyze the effects of changes in different components of money supply.
Correct answer is option 'D'. Can you explain this answer?
a)
To simplify monetary policy decisions.
b)
To assess the role of banking institutions.
c)
To predict economic growth accurately.
d)
To analyze the effects of changes in different components of money supply.
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Bank Exams India answered |
Distinguishing measures of money supply based on their functions helps in predicting the effects of changes in different components on the economy, aiding in effective monetary policy decisions.
What does the term "money market" primarily refer to in the financial system?- a)The market for buying and selling physical currency.
- b)A place where long-term funds are borrowed and lent.
- c)A reservoir of short-term funds for lending and borrowing.
- d)The market for trading government securities.
Correct answer is option 'C'. Can you explain this answer?
a)
The market for buying and selling physical currency.
b)
A place where long-term funds are borrowed and lent.
c)
A reservoir of short-term funds for lending and borrowing.
d)
The market for trading government securities.
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Universal Academy answered |
The term "money market," as per the text, primarily refers to "a reservoir of short-term funds" where institutions and individuals lend and borrow short-term funds, facilitating various financial transactions.
What determines the size of the money multiplier in an economy?- a)Cash reserve ratio (r) of the banks
- b)Currency-deposit ratio (k) of the public
- c)High-powered money (H)
- d)The total money supply (M)
Correct answer is option 'A,B'. Can you explain this answer?
What determines the size of the money multiplier in an economy?
a)
Cash reserve ratio (r) of the banks
b)
Currency-deposit ratio (k) of the public
c)
High-powered money (H)
d)
The total money supply (M)
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Universal Academy answered |
The size of the money multiplier is determined by both the cash reserve ratio (r) of banks and the currency-deposit ratio (k) of the public. It reflects how much total money supply expands for a given increase in high-powered money.
What is the main determinant of the deposit multiplier?- a)Currency-deposit ratio (k)
- b)Cash reserve ratio (r)
- c)High-powered money (H)
- d)Total money supply (M)
Correct answer is option 'B'. Can you explain this answer?
a)
Currency-deposit ratio (k)
b)
Cash reserve ratio (r)
c)
High-powered money (H)
d)
Total money supply (M)
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Universal Academy answered |
The cash reserve ratio (r) of banks determines the magnitude of the deposit multiplier, which indicates how much total deposits expand for a given increase in cash reserves.
What does the term "indigenous banking" refer to in the context of India's financial system?- a)Banking practices originating from foreign countries.
- b)Banking practices of multinational corporations.
- c)Traditional banking practices with deep historical roots in India.
- d)Banking practices regulated by the Reserve Bank of India.
Correct answer is option 'C'. Can you explain this answer?
a)
Banking practices originating from foreign countries.
b)
Banking practices of multinational corporations.
c)
Traditional banking practices with deep historical roots in India.
d)
Banking practices regulated by the Reserve Bank of India.
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Bank Exams India answered |
The term "indigenous banking" in the context of India's financial system refers to "traditional banking practices with deep historical roots in India," as described in the text.
What was the main goal of financial sector reforms in India in 1992-93?- a)To increase government interference in the financial system.
- b)To reduce the number of financial institutions.
- c)To make the financial system more market-oriented.
- d)To regulate the foreign exchange market.
Correct answer is option 'C'. Can you explain this answer?
a)
To increase government interference in the financial system.
b)
To reduce the number of financial institutions.
c)
To make the financial system more market-oriented.
d)
To regulate the foreign exchange market.
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Universal Academy answered |
The main goal of financial sector reforms in India in 1992-93, as stated in the text, was "to make the financial system more market-oriented," which included liberalization and deregulation of various financial aspects.
What is the main purpose of the cooperative banking sector in India?- a)To serve as an intermediary for foreign investments.
- b)To provide long-term credit to farmers for developmental purposes.
- c)To offer investment banking services.
- d)To regulate the stock market.
Correct answer is option 'B'. Can you explain this answer?
a)
To serve as an intermediary for foreign investments.
b)
To provide long-term credit to farmers for developmental purposes.
c)
To offer investment banking services.
d)
To regulate the stock market.
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Bank Exams India answered |
The main purpose of the cooperative banking sector in India, as mentioned in the text, is "to supplant the village moneylender" and provide long-term credit to farmers for developmental purposes, such as purchasing equipment and improving agricultural practices.
Which component of money supply represents the total amount of currency notes in circulation issued by the central bank?- a)Currency with the public
- b)Demand deposits with the public
- c)Time deposits with the banks
- d)Currency reserves of the banks
Correct answer is option 'A'. Can you explain this answer?
a)
Currency with the public
b)
Demand deposits with the public
c)
Time deposits with the banks
d)
Currency reserves of the banks
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Bank Exams India answered |
Currency with the public includes currency notes in circulation issued by the central bank, along with other forms of money in the hands of the public.
Which concept of money supply includes savings deposits with the post office savings banks?- a)Money Supply M1
- b)Money Supply M2
- c)Money Supply M3
- d)Money Supply M4
Correct answer is option 'B'. Can you explain this answer?
a)
Money Supply M1
b)
Money Supply M2
c)
Money Supply M3
d)
Money Supply M4
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Universal Academy answered |
Money Supply M2 includes savings deposits with the post office savings banks, in addition to the components of Money Supply M1.
What is the primary function of the primary cooperative credit societies in India?- a)To provide long-term credit to farmers.
- b)To offer investment opportunities in the stock market.
- c)To lend money for industrial development.
- d)To provide short-term loans for agricultural needs.
Correct answer is option 'D'. Can you explain this answer?
a)
To provide long-term credit to farmers.
b)
To offer investment opportunities in the stock market.
c)
To lend money for industrial development.
d)
To provide short-term loans for agricultural needs.
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Bank Exams India answered |
The primary function of primary cooperative credit societies in India, as per the text, is "to provide short-term loans" to members for agricultural needs such as purchasing cattle, fertilizers, and implements.
What are the two broad groups that the Indian financial system is classified into?- a)Public sector and private sector.
- b)Organized sector and unorganized sector.
- c)Commercial banks and cooperative banks.
- d)Investment banks and development banks.
Correct answer is option 'B'. Can you explain this answer?
a)
Public sector and private sector.
b)
Organized sector and unorganized sector.
c)
Commercial banks and cooperative banks.
d)
Investment banks and development banks.
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Bank Exams India answered |
The Indian financial system is classified into two broad groups, as mentioned in the text: "Organized sector and unorganized sector."
What is the primary function of the financial system as described in the text?- a)To provide a link between savings and investment for the creation of new wealth.
- b)To regulate the economy's price levels.
- c)To control the flow of foreign investments.
- d)To promote government interference in financial activities.
Correct answer is option 'A'. Can you explain this answer?
a)
To provide a link between savings and investment for the creation of new wealth.
b)
To regulate the economy's price levels.
c)
To control the flow of foreign investments.
d)
To promote government interference in financial activities.
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Bank Exams India answered |
The primary function of the financial system, as per the text, is "to provide a link between savings and investment for the creation of new wealth." This means it plays a crucial role in mobilizing savings and allocating them efficiently for investment, which contributes to economic growth.
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