Exercise Quiz & Test – 6

1. It occurs through rising prices as a result of inflation, increased scarcity on increasing earning
5)None of these

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Answer – 2)Depreciation
Explanation: Appreciation is an increase in the value of asset and acronym for depreciation

2.Exploitation of differences between the prices of financial assets or currency within or between markets by buying where prices are low and selling prices are higher.
4)None of these

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Answer – 3)Amortisation
Arbitrage does not normally involve significant risks. Profits doesn’t depend upon taking a view on future price changes.

3. The _______ is made up of visible trade(merchandise exports and imports) and invisible trade(I.e. income and expenditure for services such as Banking and insurance etc.)
1)Capital account
2)Current account
3)Deficit account
4)None of these

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Answer – 2)Current account
Capital account made of such items as inward and outward flow of money for investment and international grants and loans.

4. What was Bancor?
2)Indian Currency
3)International currency

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Answer – 3)International currency
It was proposed by J M Keynes(British economist) to be issued by an international bank foruse in the settlement of international funds. His proposal was rejected at Bretton woods  conference in 1944. However, IMF introduced SDR in 1970 similar in concept.

5. Cheque drawn by a bank is known as…..
1)Customer’s draft
2)Consumer’s draft
3)Banker’s draft
4)Demand draft

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Answer – 3)Banker’s draft
While cheque is drawn by a bank’s customer, banker’s draft is a cheque drawn by a bank.It is drawn at the request of a customer and customer’s account is debited when it is drawn. It is used when a creditor is not willing to accept a personal cheque.

6. It is a currency whose exchange rate is tending to fall because of persistent Balance of Payments deficits.
1)Hard currency
2)Soft currency
3)Hot currency
4)None of these

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Answer – 2)Soft currency
Exchange rate falls because of the building up of speculative selling of the currency in expectation of a change in its exchange rate. Governments are unwilling to hold a soft currency in their Foreign Exchange Reserves.

7. World Bank is also known as _______

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Answer – 3)IBRD
International Bank for Reconstruction and Develop(IBRD). Its establishment like the IMF was agreed upon by the representatives of forty four countries at UN Monetary and Financial conference at Bretton Woods in 1944.

8. NABARD gives RRBs ___________ loans.
1)Short term
2)Medium term
3)Long term
4)Both A and B

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Answer – 4)Both A and B
National Bank for Agricultural and Rural Development is to develop and oversee the entire rural credit system including agricultural credit.

9. It is the purchase and sale of government securities by the RBI from/to the public and banks on its own account.
1)Closed market operations
2)Open market operation
3)Core market operations
4)None of these

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Answer – 2)Open market operation
In its capacity as the government’s banker and as the manager of public debt, the RBI buys all the unsold stock of new government loans at the end of the subscription period and keeps them on sale in market on its own account.

10. Banks always keep a certain proportion of their total assets in the form of cash partly to meet the statutory reserve requirement and partly to meet day to day need for making cash payments.
4)None of these

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Answer – 2)CRR
Cash Reserve Ratio(CRR), cash is held partly in the form of cash on hand and party in the form of balances with the RBI.