Economics (Part – XII)

Total Questions: 50

11. If the inflation in an economy is rising steadily, the Central Bank might_________. [S.S.C. Online C.G.L. (T-I) 6.03.2020 (Shift-I)]

(a) increase the repo rate
(b) decrease the reverse repo rate
(c) decrease the repo rate
(d) keep the repo rate unchanged

Correct Answer: (a) increase the repo rate

Solution:If the inflation in an economy is rising steadily, the Central Bank might increase the repo rate.

12. Which of the following monetary policy tools is used by the RBI to control inflation? [S.S.C. Online MTS (T-I) 16.08.2019 (Shift-II]

(a) Fiscal traction
(b) austerity measures
(c) Repo Rate
(d) Fiscal boost

Correct Answer: (c) Repo Rate

Solution:Monetary policy tools are used by the central bank (RBI) to control inflation by increasing the repo rate and reverse repo rate, increasing the bank rate, etc. When there is an imbalance in demand and supply, the prices of goods and services increase, this increase in prices is called inflation.

13. If RBI raises the repo rate, what could be its Impact on the Indian economy? [S.S.C. Online MTS (T-I) 16.08.2019 (Shift-II)]

(a) Inflation will decrease
(b) inflation will increase
(c) Reverse repo rate will decreas
(d) debt will become cheaper

Correct Answer: (a) Inflation will decrease

Solution:If RBI increases the repo rate, it will reduce inflation. When RBI lends to commercial banks, it is called the repo rate.

14. What do banks utilize a major portion of the deposits for? [S.S.C. Online Constable GD 19.02.2019 (Shift-I)]

(a) Interest
(b) Guarantee
(c) Loan
(d) Collateral

Correct Answer: (c) Loan

Solution:Loans refer to money lent to a borrower for short-term, long-term, or for an unspecified period (a working capital facility which is renewed every year). Banks utilize a major portion of deposits for loans. Loan carries a specific rate of interest as agreed between the lender and the borrower and the terms of the agreement.

15. A loan becomes a Non-Performing Asset (NPA) when the interest or principal becomes overdue for a period of : [S.S.C. Online Constable GD 18.02.2019 (Shift-II)]

(a) 180 days
(b) 5 years
(c) 365 days
(d) 90 days

Correct Answer: (d) 90 days

Solution:According to the Reserve Bank of India, when the interest or principal becomes overdue for a period of 90 days, the loan becomes a non-performing asset (NPA). A non performing asset is a debt obligation where the borrower has not made any previously agreed-upon interest and principal repayments to the designated lender for an extended period of time.

16. Who among the following formulates the mon-etary policy in India? [S.S.C. Online CHSL (T-I) 15.10.2020 (Shift-I)]

(a) NITI Aayog
(b) The Ministry of Statistics and Programme Implementation
(c) Finance Commission of India
(d) Reserve Bank of India

Correct Answer: (d) Reserve Bank of India

Solution:Under the Reserve Bank of India, Act, 1934 (RBI Act, 1934) (as amended in 2016), RBI is entrusted with the responsibility of conducting monetary policy in India with the primary objective of maintaining price stability while keeping in mind the objective of growth.

17. How many members are there in the Indian Monetary Policy Committee? [S.S.C. Online MTS (T-I) 16.08.2019 (Shift-II)]

(a) 6
(b) 5
(c) 21
(d) 3

Correct Answer: (a) 6

Solution:The monetary policy committee is a six-member panel that sets the repo rate. Repo rate acts as a benchmark for all other interest rates in the economy. Out of the six members, three are external. They are appointed for a fixed four year term.

18. Who is responsible for conducting monetary policy? [S.S.C. Online MTS (T-I) 5.08.2019 (Shift-II)]

(a) Central Government
(b) Reserve Bank of India
(c) SEBI
(d) Other Banks

Correct Answer: (b) Reserve Bank of India

Solution:

The responsibility of conducting monetary policy lies with the Reserve Bank of India (RBI). This responsibility is expressly mandated under the Reserve Bank of India Act, 1934.

19. Which of the following is the apex banking institution of India that regulates the monetary policy? [S.S.C. Online CHSL (T-I) 18.03.2020 (Shift-III)]

(a) State Bank of India
(b) Bank of India
(c) Axis Bank
(d) Reserve Bank of India

Correct Answer: (d) Reserve Bank of India

Solution:Central bank (RBI) is an apex institution of the monetary and banking system of a nation's economy as it regulates and controls the entire banking system and monetary market of a country. It is the sole agency of note issuing and controls the supply of money in the economy.

20. The major objective of monetary policy is to - [S.S.C. Online C.G.L. (T-I) 27.08.2016 (Shift-III)]

(a) increase the government's tax revenue
(b) revamp the Public Distribution System
(c) Promote economic growth with price stability
(d) weed out corruption in the economy

Correct Answer: (c) Promote economic growth with price stability

Solution:Monetary policy is RBI's initiative to achieve price stability, financial stability, and adequate availability of credit for growth. It is also used to manage economic growth, unemployment, and inflation.

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