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Test: Indian Economy -6 - SSC CGL MCQ


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25 Questions MCQ Test SSC CGL Tier 2 - Study Material, Online Tests, Previous Year - Test: Indian Economy -6

Test: Indian Economy -6 for SSC CGL 2024 is part of SSC CGL Tier 2 - Study Material, Online Tests, Previous Year preparation. The Test: Indian Economy -6 questions and answers have been prepared according to the SSC CGL exam syllabus.The Test: Indian Economy -6 MCQs are made for SSC CGL 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Indian Economy -6 below.
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Test: Indian Economy -6 - Question 1

Consider the following statements about Society for Worldwide Interbank Financial Telecommunication (SWIFT)

  1. SWIFT sells software and services to financial institutions
  2. All international interbank messages use the SWIFT network.
  3. SWIFT does not facilitate funds transfer.

Which of the above statements is/are correct?

Detailed Solution for Test: Indian Economy -6 - Question 1

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) provides a network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized and reliable environment.
SWIFT also sells software and services to financial institutions, much of it for use on the SWIFTNet Network. (Statement 1)
The majority of international interbank messages use the SWIFT network. (Statement 2)
SWIFT does not facilitate funds transfer: rather, it sends payment orders, which must be settled by correspondent accounts that the institutions have with each other. (Statement 3)

Test: Indian Economy -6 - Question 2

Which of the following is not a consequence of rupee depreciation? 

Detailed Solution for Test: Indian Economy -6 - Question 2

Rupee deprecation badly affects importers or those who wish to visit foreign countries for holidays as they need more local currency to get the same service or product.
When rupee depreciates exporters from India are benefited. (Eg: Software companies, seafood exporters etc.)
Depreciation of rupee benefit the overseas Indians as those who are working abroad will gain more on remitting money to their homeland.

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Test: Indian Economy -6 - Question 3

Which of the following can lead to rupee depreciation?

  1. Rising interest rates in the US
  2. FPI Inflows
  3. High import intensity

Select the correct code:

Detailed Solution for Test: Indian Economy -6 - Question 3

Reasons: Global factors including rising interest rates in the US, high crude oil prices and its impact on emerging markets and the trade war between the US and China.
FPI outflows:

  • The current account deficit and net capital outflows influence the shortage of dollar liquidity, which result in rupee depreciation.
  • High import intensity in some key segments like petroleum and gems and jewellery.
  • Fall in the currencies of emerging market peers.
  • The US Federal Reserve’s rate hikes have made dollar assets give more returns.
Test: Indian Economy -6 - Question 4

Consider the following statement about Foreign Portfolio Investment (FPI)

  1. FPI does not provide investor with direct ownership of financial assets.
  2. FPI is part of country’s current account.
  3. FPI is more liquid and more risky than FDI.

Which of the above statements is/are incorrect?

Detailed Solution for Test: Indian Economy -6 - Question 4

FPI consists of securities and other financial assets passively held by foreign investors. It does not provide investor with direct ownership of financial assets. (Statement 1)
In India, FPIs are allowed to invest in various debt market instruments such as government bonds, treasury bills, state development loans (SDLs) and corporate bonds, but with certain restrictions and limits.
FPI is part of country’s capital account and shown on its balance of payments (BOP). (Statement 2)
FPI is more liquid and less risky than FDI. (Statement 3)

Test: Indian Economy -6 - Question 5

With reference to India economy, consider the following:

  1. Bank rate
  2. Open market operations
  3. Public debt
  4. Public revenue

Which of the above is/are component/components of Monetary Policy?

Detailed Solution for Test: Indian Economy -6 - Question 5

Public debt and Public revenue are matters falling under Fiscal policy. The Ministry of Finance handles these subjects.
Bank rate and OMOs fall within the jurisdiction of RBI’s monetary policy.

Test: Indian Economy -6 - Question 6

A foreigner is travelling by Air India from Delhi to Mumbai. What will this be considered as in terms of national income: 

Detailed Solution for Test: Indian Economy -6 - Question 6

In this case Air India is an Indian Company and a foreigner will be contributing money towards his travel. Therefore, overall there would be foreign exchange inflow and thus we can classify it as an export.

Test: Indian Economy -6 - Question 7

Gross capital formation will increase if:

  1. gross domestic savings increases
  2. gross domestic consumption increases
  3. GDP increases

Select the correct answer using the codes given below.

Detailed Solution for Test: Indian Economy -6 - Question 7

Gross capital formation, in simple terms is equivalent to investment made. It was earlier called gross domestic investment. The part of GDP that is used is called gross domestic consumption, while the part that is saved is gross domestic savings (GDS). Some part of this GDS will be re-invested back, and that is called gross capital formation. Now, an increase in GDP or GDS will not necessarily lead to an increase in capital formation. Because how much in invested back will depend on many other factors.

Test: Indian Economy -6 - Question 8

Under a managed floating exchange rate system, the nation’s monetary authorities intervene in foreign exchange markets to 

Detailed Solution for Test: Indian Economy -6 - Question 8

A managed floating exchange rate system is a flexible exchange rate system in which the government or the country’s central bank may occasionally intervene in order to direct the country’s currency value into a certain direction. This is generally done in order to act as a buffer against economic shocks and hence soften its effect in the economy.

Test: Indian Economy -6 - Question 9

Predatory pricing policy is designed to 

Detailed Solution for Test: Indian Economy -6 - Question 9

Predatory Pricing – the pricing of goods or services at such a low level that other firms cannot compete and are forced to leave the market.

Test: Indian Economy -6 - Question 10

Hedging in the foreign exchange market refers to:

Detailed Solution for Test: Indian Economy -6 - Question 10

A hedge is an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract.

Test: Indian Economy -6 - Question 11

Consider the following statements about Foreign portfolio investment (FPI) in India.

  1. It is any equity investment by non-residents which is less than or equal to 50% of capital in a company.
  2. As per SEBI regulations, FPIs are not allowed to invest in unlisted shares and investment in unlisted entities.
  3. According to SEBI rules, investors are prohibited from investing in government bonds.

Which of the above statements is/are correct?

Detailed Solution for Test: Indian Economy -6 - Question 11
  • Foreign Portfolio Investment (FPI) is investment by non-residents in Indian securities including shares, government bonds, corporate bonds, convertible securities, infrastructure securities etc.
  • SEBI has recently stipulated the criteria for Foreign Portfolio Investment. According to this, any equity investment by non-residents which is less than or equal to 10% of capital in a company is portfolio investment. While above this the investment will be counted as Foreign Direct Investment (FDI).
  • As per SEBI regulations, FPIs are not allowed to invest in unlisted shares and investment in unlisted entities will be treated as FDI.
Test: Indian Economy -6 - Question 12

Which of the following are not the components of Non tax revenue receipts?

  1. Government earning Dividends and profits from PSUs.
  2. Goods and Services Tax (GST)
  3. State governments receiving grants from the Central Government
  4. Wealth Tax
  5. Value Added Tax (VAT)

Select the correct code:

Detailed Solution for Test: Indian Economy -6 - Question 12

Revenue receipts are of two types viz. Tax Revenue and Non-tax revenue.
Tax revenues are either direct taxes or indirect taxes. Income Tax, Corporate tax, Gift Tax, Wealth Tax and Property tax etc. are direct taxes. Sales tax, Value Added Tax (VAT), Goods and Services tax (GST) are indirect tax.
Non Tax Revenue Receipts are those revenue receipts which are not generated by Taxing the public.
They include:

  • Money which the Government earns as “Dividends and profits” from public enterprises (PSUs). Interest which the Government earns on the money lent by it to external or internal borrowers.
  • Money received through stamp printing, currency printing, medal printing etc.
  • Money which the government accrues as fees, fines, penalties etc.
  • Grants the Government of India receives from the external sources.
  • In case of the state Governments, it may be the internal grant from the central Government.
Test: Indian Economy -6 - Question 13

Consider the following statements about Purchasing Managers’ Index (PMI)

  1. It is an indicator of business activity in the manufacturing sector only.
  2. A figure above 50 denotes expansion in business activity. Anything below 50 denotes contraction.
  3. PMI is usually released at start of month by Central Statistics Office (CSO).

Which of the above statements is/are correct?

Detailed Solution for Test: Indian Economy -6 - Question 13

PMI or a Purchasing Managers’ Index (PMI) is an indicator of business activity — both in the manufacturing and services sectors. It is a survey-based measures that asks the respondents about changes in their perception of some key business variables from the month before. It is calculated separately for the manufacturing and services sectors and then a composite index is constructed.
How is the PMI derived?

  • The PMI is derived from a series of qualitative questions. Executives from a reasonably big sample, running into hundreds of firms, are asked whether key indicators such as output, new orders, business expectations and employment were stronger than the month before and are asked to rate them.
Test: Indian Economy -6 - Question 14

Consider the following statements about Small Finance Banks (SFBs)

  1. Unorganised sector entities are not eligible to receive loans from SFBs.
  2. The minimum paid-up equity capital for small finance banks shall be Rs. 100 crore.
  3. Foreign shareholding are not allowed.
  4. The small finance banks are required to extend 75 per cent of its Adjusted Net Bank Credit (ANBC) towards priority sector lending (PSL).

Which of the above statements is/are incorrect?

Detailed Solution for Test: Indian Economy -6 - Question 14

The objectives of setting up of small finance banks will be to further financial inclusion by (a) provision of savings vehicles, and (ii) supply of credit to small business units; small and marginal farmers; micro and small industries; and other unorganised sector entities, through high technology-low cost operations.
Eligible promoters: Resident individuals/professionals with 10 years of experience in banking and finance; and companies and societies owned and controlled by residents will be eligible to set up small finance banks. Existing Non-Banking Finance Companies (NBFCs), Micro Finance Institutions (MFIs), and Local Area Banks (LABs) that are owned and controlled by residents can also opt for conversion into small finance banks.

Test: Indian Economy -6 - Question 15

Consider the following statements about e-Kuber.

  1. e-Kuber is the Core Banking Solution of SBI.
  2. State /central Governments are also the users.
  3. It is a portal based service.

Which of the above statements is/are correct?

Detailed Solution for Test: Indian Economy -6 - Question 15
  • e-Kuber is the Core Banking Solution of Reserve Bank of India. E-Kuber provides the provision of a single current account for each bank across the country, with decentralised access to this account from anywhere-anytime using portal based services in a safe manner.
  • e-Kuber enables ease of operations. The system also benefits state /central Governments as users. Some of the facilities offered include the provision of portal based access which allows Government departments to access on anywhere-anytime basis and view their balances.
  • The e-kuber system can be accessed either through INFINET or Internet.
Test: Indian Economy -6 - Question 16

Consider the following statements about Inflation Indexed Bond (IIB)

  1. It is a bond issued by the Government and the Corporate sector.
  2. There are no special tax concessions for these bonds.
  3. They are eligible to be kept as part of Statutory Liquidity Ratio requirements of banks.

Which of the above statements is/are correct?

Detailed Solution for Test: Indian Economy -6 - Question 16
  • Inflation Indexed Bond (IIB) is a bond issued by the Sovereign, which provides the investor a constant return irrespective of the level of inflation in the economy. The main objective of Inflation Indexed Bonds is to provide a hedge and to safeguard the investor against macroeconomic risks in an economy.
  • There are no special tax concessions for these bonds. IIBs are treated as government securities (G-Sec) and therefore, would be eligible for short-sale and repo transactions and gets SLR status (i.e., they are eligible to be kept as part of Statutory Liquidity Ratio requirements of banks).
Test: Indian Economy -6 - Question 17

Consider the following statements about Peer to peer (P2P) lending.

  1. It is a form of crowdfunding used to raise unsecured loans which are re-paid with interest.
  2. Only individuals can borrow money.
  3. RBI enabled P2P entities as Non-Banking Financial Company (NBFC).
  4. Minimum net worth requirement for these platforms is kept at Rs. 5 Cr.

​Which of the above statements is/are incorrect?

Detailed Solution for Test: Indian Economy -6 - Question 17
  • Peer to peer (P2P) lending is a form of crowdfunding used to raise unsecured loans which are re-paid with interest. Crowdfunding refers to financing of projects with small amounts of money raised from a large number of people, with a portal serving as an intermediary. It utilises an online platform which serves as a link between borrowers and lenders.
  • RBI vide a Notification on 24th August, 2017, enabled P2P entities as Non-Banking Financial Company (NBFC). However, an existing NBFC will not be able to operate as an NBFC-P2P.
  • Minimum networth requirement for these platforms is kept at Rs. 2 Cr. The borrower can either be an individual or a legal person (say a body of individuals, a HUF, a firm, a society or any artificial body, whether incorporated or not) requiring a loan.
  • The interest rate is not to be fixed by the platform. The interest rate for each and every loan is to be fixed separately over the electronic platform by way of a mutual agreement between the borrower and lender. Fund transfer between participants on the P2P lending platform will happen through escrow account mechanisms. All fund transfers shall be through and from bank accounts, and cash transactions are strictly prohibited.
Test: Indian Economy -6 - Question 18

Under Statutory Liquidity Ratio (SLR) all Scheduled Commercial Banks in India must maintain an amount in which of the following forms?

  1. Cash
  2. Gold
  3. Treasury-Bills of the Government of India
  4. Corporate Bonds
  5. State Development Loans (SDLs)

Which of the above statements is/are correct?

Detailed Solution for Test: Indian Economy -6 - Question 18

The Statutory Liquidity Ratio (SLR) is a prudential measure under which (as per the Banking Regulations Act 1949) all Scheduled Commercial Banks in India must maintain an amount in one of the following forms as a percentage of their total Demand and Time Liabilities (DTL) / Net DTL (NDTL);
(i) Cash.
(ii) Gold; or
(iii) Investments in un-encumbered Instruments that include;
(a) Treasury-Bills of the Government of India.
(b) Dated securities including those issued by the Government of India from time to time under the market borrowings programme and the Market Stabilization Scheme (MSS).
(c) State Development Loans (SDLs) issued by State Governments under their market borrowings programme.
(d) Other instruments as notified by the RBI.
If a bank fails to meet its SLR obligation, a penalty in the form of a penal interest payable is imposed.
SLR is also a tool for controlling liquidity in the domestic market via manipulating bank credit. A rise in SLR locks up increasing portion of a bank’s assets in the above three categories and may squeeze out bank credit.
In the wake of the global financial crisis, the SLR was reduced from 25 percent to 24 percent in November, 2008. As of April 2016 the SLR stands at 21.25 percent.

Test: Indian Economy -6 - Question 19

Buoyancy of tax refers to: 

Detailed Solution for Test: Indian Economy -6 - Question 19

There is a strong connection between the government’s tax revenue earnings and economic growth. The simple fact is that as the economy achieves faster growth, the tax revenue of the government also goes up.
Tax buoyancy explains this relationship between the changes in government’s tax revenue growth and the changes in GDP. It refers to the responsiveness of tax revenue growth to changes in GDP. When a tax is buoyant, its revenue increases without increasing the tax rate.

Test: Indian Economy -6 - Question 20

Which of the following developments may not likely reduce the fiscal deficit?

  1. Increasing Foreign Direct Investment (FDI)
  2. Providing budgetary support to public sector enterprises
  3. Waiving off farm loans.
  4. Austerity measures should be adopted.

Select the correct code:

Detailed Solution for Test: Indian Economy -6 - Question 20
  • Fiscal deficit (FD) is the difference between revenue receipts plus non-debt capital receipts on the one side and total expenditure including loans, net of repayments, on the other. It measures the gap between the government consumption expenditure including loan repayments and the anticipated income from tax and non-tax revenues.
  • It also indicates the borrowing requirements of the government from all sources. The bigger the gap the more the government will have to borrow or resort to printing money to make both ends meet. Indiscriminate borrowings will push the economy into debt trap, while too much deficit financing may be inflationary.
Test: Indian Economy -6 - Question 21

Consider the following statements about Reserve Bank of India.

  1. The bank was set up based on the recommendations of the Hilton–Young Commission.
  2. Performs merchant banking function for the central and the state governments; also acts as their banker.
  3. Manages the Foreign Exchange Management Act, 1999.
  4. Issues and exchanges or destroys currency and coins not fit for circulation.

Which of the above statements is/are correct?

Detailed Solution for Test: Indian Economy -6 - Question 21

Main Functions
Monetary Authority:

  • Formulates, implements and monitors the monetary policy.
  • Objective: maintaining price stability while keeping in mind the objective of growth.

Regulator and supervisor of the financial system:

  • Prescribes broad parameters of banking operations within which the country’s banking and financial system functions.
  • Objective: maintain public confidence in the system, protect depositors’ interest and provide cost-effective banking services to the public.

Manager of Foreign Exchange

  • Manages the Foreign Exchange Management Act, 1999.
  • Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

Issuer of currency:

  • Issues and exchanges or destroys currency and coins not fit for circulation.
  • Objective: to give the public adequate quantity of supplies of currency notes and coins and in good quality.

Developmental role

  • Performs a wide range of promotional functions to support national objectives.

Related Functions

  • Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker.
  • Banker to banks: maintains banking accounts of all scheduled banks
Test: Indian Economy -6 - Question 22

Consider the following statements about Rural Infrastructure Development Fund (RIDF).

  1. Government of India created the RIDF in NABARD.
  2. The eligible activities are classified into Agriculture and related sector, Social sector and rural connectivity.
  3. Panchayat Raj Institutions, Self Help Groups (SHGs) and NGOs are also eligible to receive funds.

Which of the above statements is/are correct?

Detailed Solution for Test: Indian Economy -6 - Question 22

The RIDF was set up by the Government in 1995-96 for financing ongoing rural Infrastructure projects. The Fund is maintained by the National Bank for Agriculture and Rural Development (NABARD). Domestic commercial banks contribute to the Fund to the extent of their shortfall in stipulated priority sector lending to agriculture. The main objective of the Fund is to provide loans to State Governments and State-owned corporations to enable them to complete ongoing rural infrastructure projects.

At present, there are 37 eligible activities under RIDF as approved by GoI. The eligible activities are classified under three broad categories i.e.

  • Agriculture and related sector
  • Social sector
  • Rural connectivity
     
Test: Indian Economy -6 - Question 23

Consider the following statements about ‘Fiat Money’.

  1. It is a currency that a government has declared to be legal tender.
  2. It is backed by a physical commodity.
  3. Its value increases during hyperinflation.

Which of the above statements is/are incorrect?

Detailed Solution for Test: Indian Economy -6 - Question 23

Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity. The value of fiat money is derived from the relationship between supply and demand rather than the value of the material from which the money is made. Because fiat money is not linked to physical reserves, it risks becoming worthless due to hyperinflation.

Test: Indian Economy -6 - Question 24

Consider the following statements about fugitive economic offender.

  1. It is an individual who has committed some specified offence(s) involving an amount of one hundred crore rupees or more and has absconded from India.
  2. He is declared so by a ‘Special Court’ set up under the Prevention of Corruption Act, 1988.
  3. The property of a fugitive economic offender, resulting from the proceeds of crime, including benami property, can be confiscated once he is declared so by the Court.
  4. Properties abroad are not liable for confiscation.

Which of the above statements is/are incorrect?

Detailed Solution for Test: Indian Economy -6 - Question 24
  • A fugitive economic offender is an individual who has committed some specified offence(s) involving an amount of one hundred crore rupees or more and has absconded from India or refused to come back to India to avoid or face criminal prosecution in India.
  • A Fugitive Economic Offender is a person declared so by a ‘Special Court’ set up under the Prevention of Money-laundering Act (PMLA), 2002 against whom an arrest warrant has been issued in respect of any of the economic offences provided in the schedule to Fugitive Economic Offenders Bill, 2018 and who has left India so as to avoid criminal prosecution, or being abroad, refuses to return to India to face criminal prosecution.
  • The property of a fugitive economic offender, resulting from the proceeds of crime, including benami property, can be confiscated once he is declared so by the Court. Properties abroad are also liable for confiscation.
Test: Indian Economy -6 - Question 25

Consider the following statements about Consumer Food Price Index (CFPI).

  1. It is a measure of change in retail prices of food products consumed by a defined population group in a given area
  2. It is released by Central Statistics Office (CSO) for three categories -rural, urban and combined.
  3. Cereals and products constitute more than 50 percent weight within CFPI.

Which of the above statements is/are correct?

Detailed Solution for Test: Indian Economy -6 - Question 25
  • Consumer Food Price Index (CFPI) is a measure of change in retail prices of food products consumed by a defined population group in a given area with reference to a base year.
  • The Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation (MOSPI) started releasing Consumer Food Price Indices (CFPI) for three categories -rural, urban and combined – separately on an all India basis with effect from May, 2014.
  • Like Consumer Price Index (CPI), the CFPI is also calculated on a monthly basis and methodology remains the same as CPI. The base year presently used is 2012.
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