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Test: Role of financial System in Economic Development - B Com MCQ


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10 Questions MCQ Test Indian Financial System - Test: Role of financial System in Economic Development

Test: Role of financial System in Economic Development for B Com 2024 is part of Indian Financial System preparation. The Test: Role of financial System in Economic Development questions and answers have been prepared according to the B Com exam syllabus.The Test: Role of financial System in Economic Development MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Role of financial System in Economic Development below.
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Test: Role of financial System in Economic Development - Question 1
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What is the role of financial institutions in the savings-investment relationship?

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Financial institutions play a crucial role in the savings-investment relationship by offering attractive interest rates to the public. This encourages individuals to save their money instead of spending it. These savings are then channeled into productive resources in the form of investment, which promotes economic development. By providing incentives for saving, financial institutions contribute to the growth of investment and production in a country.
Test: Role of financial System in Economic Development - Question 2
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How does the financial system help in the growth of capital markets?

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The financial system plays a crucial role in the growth of capital markets by providing opportunities for investment with minimized risks. Financial institutions and the capital market allow businesses to raise fixed capital through the issuance of debentures and shares. Investors, including the public and other financial institutions, invest in these securities to earn a good return with reduced risks. This enables businesses to raise the necessary capital for investment in fixed assets, promoting economic development.
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Test: Role of financial System in Economic Development - Question 3
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What is the role of the foreign exchange market in the financial system?

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The foreign exchange market plays a crucial role in the financial system by enabling governments to meet their foreign exchange requirements. This market allows exporters and importers to receive and raise funds for settling transactions in different currencies. It also provides opportunities for banks to borrow from and lend to customers in various foreign currencies. Additionally, the market allows banks to invest their short-term idle funds to earn profits. Governments benefit from this market as they can meet their foreign exchange requirements, contributing to economic development.
Test: Role of financial System in Economic Development - Question 4
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How does the financial system contribute to the growth of infrastructure industries?
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The financial system plays a crucial role in the growth of infrastructure industries by providing funds for their development. Private sector industries often find it difficult to raise the significant capital required to establish infrastructure industries. However, with the help of financial services, such as development banks and merchant banks, capital can be raised for these industries. By providing the necessary funds, the financial system promotes the growth of infrastructure industries, which are essential for overall economic development.
Test: Role of financial System in Economic Development - Question 5
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What role does the government securities market play in the financial system?
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The government securities market plays a crucial role in the financial system by enabling governments to raise both short-term and long-term funds. Governments issue bills and bonds in this market, which carry attractive interest rates along with tax concessions. By issuing these securities, governments can raise the necessary funds to fill the budgetary gap and meet their financial commitments. This market ensures that governments have access to the capital they need for various developmental projects, contributing to economic development.
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How does the financial system contribute to the promotion of trade?
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The financial system plays a crucial role in the promotion of both domestic and foreign trade by providing financing and discounting instruments. Financial institutions finance traders, while the financial market facilitates the discounting of financial instruments, such as bills. Commercial banks also provide per-shipment and post-shipment finance, as well as issue letters of credit in favor of importers, which promotes foreign trade. The financial system enables the smooth flow of funds and supports trade activities, contributing to economic development.
Test: Role of financial System in Economic Development - Question 7
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What is the role of venture capital in the economic development of a country?
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Venture capital plays a crucial role in the economic development of a country by promoting the growth of ventures and modern technology through financial support. Venture capital cannot be provided by individual companies alone due to the higher risks involved. However, through the financial system, various financial institutions contribute a portion of their investable funds to support the promotion of new ventures. This financial support enables the creation and growth of ventures, fostering the development of modern technology and contributing to overall economic development.
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How does the presence of a financial system contribute to employment growth?
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The presence of a financial system contributes to employment growth by generating more opportunities through the provision of working capital and financial services. The money market, which is part of the financial system, provides working capital to businesses, increasing production and creating more employment opportunities. Additionally, the growth of various sectors, such as sales, marketing, and advertisement, driven by competition, leads to additional employment opportunities. Various financial services, such as leasing, factoring, and merchant banking, also generate employment. The financial system plays a crucial role in creating employment opportunities and supporting economic development.
Test: Role of financial System in Economic Development - Question 9
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What is the role of the financial system in ensuring balanced growth in different sectors?
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The financial system plays a crucial role in ensuring balanced growth in different sectors by allocating funds to all sectors, including industries, agriculture, and service sectors. To achieve economic development, it is essential to promote growth in all sectors simultaneously. The financial system, through various financial institutions and market mechanisms, ensures that funds are distributed to all sectors in a manner that facilitates balanced growth. By providing access to capital for industries, agriculture, and service sectors, the financial system supports the overall development of the economy.
Test: Role of financial System in Economic Development - Question 10
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How does the financial system contribute to political stability in a country?
Detailed Solution for Test: Role of financial System in Economic Development - Question 10
The financial system contributes to political stability in a country by creating a congenial business atmosphere for industries. Stable political conditions are essential for the functioning of the financial system and economic development. The financial system provides suitable protection and credit requirements for industries, even during difficult periods, which promotes a stable business environment. By supporting the financial commitments of the government, regulating speculative transactions, and minimizing the growth of black money, the financial system contributes to political stability and fosters economic development.
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