Q. What is the primary tool used by the RBI to control inflation?
A.
Adjusting the Cash Reserve Ratio
B.
Changing the Statutory Liquidity Ratio
C.
Modifying the repo rate
D.
Issuing new currency
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Solution
The primary tool used by the RBI to control inflation is modifying the repo rate.
Correct Answer:
C
— Modifying the repo rate
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Q. What is the purpose of Open Market Operations (OMO)?
A.
To control the money supply in the economy
B.
To regulate foreign exchange rates
C.
To set interest rates for loans
D.
To manage government expenditure
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Solution
OMO is conducted to control the money supply in the economy by buying or selling government securities.
Correct Answer:
A
— To control the money supply in the economy
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Q. What is the purpose of the Cash Reserve Ratio (CRR)?
A.
To control inflation
B.
To ensure liquidity in the economy
C.
To regulate the money supply
D.
To provide funds for government projects
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Solution
The Cash Reserve Ratio (CRR) is used to regulate the money supply by requiring banks to hold a certain percentage of their deposits with the RBI.
Correct Answer:
C
— To regulate the money supply
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Q. What is the purpose of the Liquidity Adjustment Facility (LAF) provided by the RBI?
A.
To provide long-term loans to banks
B.
To manage short-term liquidity mismatches
C.
To control inflation directly
D.
To regulate foreign investments
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Solution
The Liquidity Adjustment Facility (LAF) allows banks to borrow money through repurchase agreements to manage short-term liquidity mismatches.
Correct Answer:
B
— To manage short-term liquidity mismatches
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Q. What is the purpose of the Repo Rate?
A.
To control inflation
B.
To provide liquidity to banks
C.
To regulate foreign exchange rates
D.
To set the interest rates for savings accounts
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Solution
The Repo Rate is used by the RBI to provide liquidity to banks, allowing them to borrow money in times of need.
Correct Answer:
B
— To provide liquidity to banks
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Q. What is the relationship between inflation and interest rates?
A.
Higher inflation typically leads to lower interest rates
B.
Higher inflation typically leads to higher interest rates
C.
Inflation has no effect on interest rates
D.
Interest rates are always fixed regardless of inflation
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Solution
Higher inflation usually leads to higher interest rates as lenders need to compensate for the decrease in purchasing power.
Correct Answer:
B
— Higher inflation typically leads to higher interest rates
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Q. What is the role of automatic stabilizers in fiscal policy?
A.
To increase taxes during a recession
B.
To decrease government spending during a boom
C.
To automatically adjust government spending and taxes
D.
To eliminate budget deficits
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Solution
Automatic stabilizers, such as unemployment benefits and progressive taxes, automatically adjust government spending and taxes in response to economic conditions.
Correct Answer:
C
— To automatically adjust government spending and taxes
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Q. What is the role of the Integrated Child Development Services (ICDS) in food security?
A.
Providing food grains to farmers
B.
Ensuring nutritional support to children and mothers
C.
Regulating food prices
D.
Importing food for distribution
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Solution
ICDS aims to provide nutritional support and food security to children and mothers, addressing malnutrition.
Correct Answer:
B
— Ensuring nutritional support to children and mothers
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Q. What is the role of the RBI in managing the foreign exchange market?
A.
Setting exchange rates
B.
Controlling inflation
C.
Regulating interest rates
D.
Issuing foreign currency
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Solution
The RBI plays a crucial role in managing the foreign exchange market by intervening to stabilize the exchange rate and ensure orderly conditions.
Correct Answer:
A
— Setting exchange rates
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Q. What is the role of the Reserve Bank of India (RBI) in agricultural financing?
A.
Setting interest rates for agricultural loans
B.
Directly providing loans to farmers
C.
Regulating crop prices
D.
Importing agricultural products
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Solution
The RBI plays a crucial role in setting interest rates for agricultural loans, influencing the cost of borrowing for farmers.
Correct Answer:
A
— Setting interest rates for agricultural loans
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Q. What is the role of the Reserve Bank of India (RBI) in economic planning?
A.
Regulating foreign exchange
B.
Setting interest rates
C.
Issuing currency
D.
All of the above
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Solution
The RBI plays a crucial role in economic planning by regulating foreign exchange, setting interest rates, and issuing currency.
Correct Answer:
D
— All of the above
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Q. What is the role of the Reserve Bank of India (RBI) in fiscal management?
A.
Setting fiscal policy
B.
Managing government accounts
C.
Regulating stock markets
D.
Controlling inflation directly
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Solution
The RBI manages government accounts and facilitates the government's borrowing program, playing a crucial role in fiscal management.
Correct Answer:
B
— Managing government accounts
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Q. What is the role of the Reserve Bank of India (RBI) in fiscal policy?
A.
Setting tax rates
B.
Managing government debt
C.
Regulating foreign exchange
D.
Controlling inflation through interest rates
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Solution
The RBI plays a role in managing government debt by facilitating the issuance of government securities and managing liquidity.
Correct Answer:
B
— Managing government debt
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Q. What is the role of the Reserve Bank of India (RBI) in relation to unemployment?
A.
Setting interest rates
B.
Regulating stock markets
C.
Managing foreign exchange
D.
Controlling inflation
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Solution
The RBI influences unemployment indirectly by setting interest rates, which affect borrowing, spending, and investment in the economy.
Correct Answer:
A
— Setting interest rates
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Q. What is the role of the Reserve Bank of India (RBI) in the banking structure?
A.
To provide loans to individuals
B.
To regulate and supervise the banking sector
C.
To offer investment advice
D.
To manage foreign exchange
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Solution
The RBI regulates and supervises the banking sector to ensure financial stability and protect depositors.
Correct Answer:
B
— To regulate and supervise the banking sector
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Q. What is the significance of a contingency fund in disaster management?
A.
To reduce government debt
B.
To provide immediate financial resources for emergencies
C.
To stabilize currency value
D.
To fund long-term development projects
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Solution
A contingency fund is significant in disaster management as it provides immediate financial resources for emergencies, enabling quick response and recovery efforts.
Correct Answer:
B
— To provide immediate financial resources for emergencies
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Q. What is the significance of capital budgeting?
A.
It focuses on short-term financial planning
B.
It assesses long-term investment projects
C.
It determines tax policies
D.
It manages daily operational costs
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Solution
Capital budgeting is significant as it assesses long-term investment projects to determine their feasibility and potential returns.
Correct Answer:
B
— It assesses long-term investment projects
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Q. What is the significance of crop insurance in agriculture?
A.
To increase crop yield
B.
To protect against crop loss
C.
To reduce soil erosion
D.
To enhance irrigation efficiency
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Solution
Crop insurance is significant as it protects farmers against financial losses due to crop failure caused by adverse weather conditions or other risks.
Correct Answer:
B
— To protect against crop loss
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Q. What is the significance of crop rotation in agriculture?
A.
It increases water usage
B.
It helps in pest control
C.
It reduces soil fertility
D.
It requires more irrigation
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Solution
Crop rotation is significant as it helps in pest control and improves soil health by alternating the types of crops grown, which can reduce the buildup of pests and diseases.
Correct Answer:
B
— It helps in pest control
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Q. What is the significance of the Marginal Standing Facility (MSF) in the RBI's monetary policy?
A.
It allows banks to borrow overnight funds at a higher rate
B.
It is used to control inflation directly
C.
It provides long-term loans to the government
D.
It regulates the foreign exchange market
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Solution
The Marginal Standing Facility (MSF) allows banks to borrow overnight funds from the RBI at a higher rate, providing a safety valve against liquidity shortages.
Correct Answer:
A
— It allows banks to borrow overnight funds at a higher rate
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Q. What is the significance of the National Food Security Mission (NFSM)?
A.
To promote food exports
B.
To enhance production of food grains
C.
To reduce food prices
D.
To provide loans to farmers
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Solution
The NFSM aims to increase the production of food grains through various initiatives, thereby improving food security.
Correct Answer:
B
— To enhance production of food grains
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Q. What is the significance of the Planning Commission in India?
A.
To formulate Five-Year Plans
B.
To regulate banks
C.
To control inflation
D.
To manage foreign trade
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Solution
The Planning Commission was established to formulate Five-Year Plans aimed at economic development and resource allocation.
Correct Answer:
A
— To formulate Five-Year Plans
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Q. What is the significance of the Pradhan Mantri Jan Dhan Yojana in promoting inclusive growth?
A.
It increases tax revenue
B.
It provides direct cash transfers
C.
It aims to provide banking access to all
D.
It focuses on industrial development
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Solution
The Pradhan Mantri Jan Dhan Yojana aims to provide banking access to all, which is essential for financial inclusion and inclusive growth.
Correct Answer:
C
— It aims to provide banking access to all
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Q. What is the significance of the SLR (Statutory Liquidity Ratio)?
A.
It determines the minimum cash reserves for banks
B.
It regulates the amount of gold banks must hold
C.
It ensures banks maintain a certain percentage of liquid assets
D.
It controls the interest rates on loans
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Solution
The SLR ensures that banks maintain a certain percentage of liquid assets, promoting financial stability.
Correct Answer:
C
— It ensures banks maintain a certain percentage of liquid assets
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Q. What is the term for the total amount of money a government owes to creditors?
A.
Budget deficit
B.
Public debt
C.
Fiscal surplus
D.
National savings
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Solution
Public debt refers to the total amount of money that a government owes to its creditors.
Correct Answer:
B
— Public debt
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Q. What role do insurance products play in disaster management?
A.
They increase financial risk
B.
They provide financial protection against losses
C.
They reduce the need for government intervention
D.
They are not relevant in disaster scenarios
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Solution
Insurance products provide financial protection against losses incurred during disasters, helping individuals and businesses recover more effectively.
Correct Answer:
B
— They provide financial protection against losses
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Q. What role does microfinance play in the context of inclusive growth in India?
A.
It increases corporate investments
B.
It provides loans to small businesses
C.
It supports large-scale industries
D.
It focuses on government funding
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Solution
Microfinance provides small loans to individuals and small businesses, enabling them to invest and grow, thus contributing to inclusive growth.
Correct Answer:
B
— It provides loans to small businesses
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Q. What role does the Food Corporation of India (FCI) play in food security?
A.
Regulating food prices
B.
Storing and distributing food grains
C.
Providing loans to farmers
D.
Importing food grains
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Solution
The FCI is responsible for the procurement, storage, and distribution of food grains to ensure food security in India.
Correct Answer:
B
— Storing and distributing food grains
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Q. What role does the RBI play in financing environmental initiatives?
A.
Directly funding projects
B.
Setting interest rates for green loans
C.
Regulating environmental laws
D.
Issuing environmental permits
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Solution
The RBI can influence financing for environmental initiatives by setting favorable interest rates for green loans.
Correct Answer:
B
— Setting interest rates for green loans
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Q. What role does the Reserve Bank of India (RBI) play in agricultural financing?
A.
Directly providing loans to farmers
B.
Regulating interest rates for agricultural loans
C.
Setting crop prices
D.
Controlling irrigation policies
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Solution
The RBI regulates interest rates for agricultural loans, influencing the cost of borrowing for farmers and thereby impacting agricultural investment.
Correct Answer:
B
— Regulating interest rates for agricultural loans
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