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Money and Banking

Description: INDIAN ECONOMY MONEY AND BANKING - General Knowledge Indian Economy Money and Banking Practice and Online Preparation Test for Bank PO, SSC, CDS, UPSC and Other Exams
Number of Questions: 30
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Tags: Money and Banking UPSC MBA B.ED HOTEL MANAGEMENT RRB LIC INDIAN ECONOMY MONEY AND BANKING MBA Finance FInance Jobs Commercial Jobs Banking Terminologies General Awareness Banking Terminology Indian Banking and Financial System Letter E Social Science
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Increase in bank rates generally is followed by

  1. an increase in market rate of interest

  2. a fall in market rate of interest

  3. a rise only in the deposit rate, but not the lending rate

  4. a rise only in the lending rates

Show answer
Correct Option: A

Payment of a cheque cannot be made on a cash counter of bank if the cheque is

  1. bearer

  2. cross

  3. order

  4. All of the above

  5. None of these

Show answer
Correct Option: B

Which of the following is not an example of 'near-money'?

  1. Bill of exchange

  2. Bonds and debentures

  3. Equity shares of Ranbaxy company limited

  4. Treasury bills of the Government of India

Show answer
Correct Option: C

What is bank draft?

  1. Letter from a bank

  2. Cheque which a bank draws itself

  3. Instruction to a banker to collect a customer's debt

  4. Instruction not to honour a stop payment

  5. None of these

Show answer
Correct Option: B
Explanation:

Option 2 is correct.

The principal liability of a Joint Stock Bank relates to

  1. it's investment abroad

  2. it's investment at home

  3. repayment of it's customer's deposits

  4. it's requirements to make special deposits when requested

Show answer
Correct Option: C

All of the following are the liabilities of Commercial Banks, except

  1. security holdings

  2. treasury deposit at banks

  3. demand deposits and time deposits

  4. borrowings from Central Bank

  5. None of these

Show answer
Correct Option: A
Explanation:

Security holdings

A 'stale' cheque is the one that is

  1. over six months old

  2. over three months old

  3. cancelled by the drawer

  4. written on an account which is overdrawn

  5. convening an overdue payment

Show answer
Correct Option: A
Explanation:

 A stale cheque is the one that is six months old.

‘Fiat Money’ is that which is

  1. accepted by overseas banks only

  2. decreed as money by the government

  3. backed by gold or silver

  4. accepted temporarily in lieu of gold

  5. None of these.

Show answer
Correct Option: D
Explanation:

 Option (4) is correct.

‘Not Negotiable’ written on a cheque crossing means

  1. the cheque cannot be paid to any one but the payee

  2. the cheque is not presented by anyone other than the payee

  3. an honest person receiving a stolen cheque is liable to repay the rightful owner

  4. the cheque must be paid into a bank

  5. none of these

Show answer
Correct Option: B

On which type of account do banks generally not pay interest?

  1. Savings account

  2. Current account

  3. Fixed deposit account

  4. Recurring deposit account

  5. None of these

Show answer
Correct Option: B
Explanation:

 Banks do not pay interest on current account.

Which of the following is not a commercial bank?

  1. Reserve Bank of India

  2. State Bank of India

  3. Canra Bank

  4. Oriental Bank of Commerce

Show answer
Correct Option: A

The essential characteristic of whatever serves as money is that it must

  1. be issued by the State

  2. be generally acceptable

  3. not be wholly fiduciary

  4. have some instrinsic value

Show answer
Correct Option: B

Money is

  1. acceptable only when it has intrinsic value

  2. constant in purchasing power

  3. the most liquid of all assets

  4. All of the above

  5. None of these

Show answer
Correct Option: C

Greshan's law states that

  1. bad money promotes good money in the system

  2. bad money drives good money out of circulation

  3. good money drives bad money out of circulation

  4. good money promotes bad money in the system

Show answer
Correct Option: B

Demand pull inflation can be caused by money factors including

  1. a fall in the consumption expenditure

  2. a sharp increase in unemployment

  3. a steep reduction in the direct taxation

  4. an increase in the income tax

  5. a sharp decrease in unemployment

Show answer
Correct Option: C
Explanation:

A steep reduction in the direct taxation increases the aggregate demand, thereby causing demand pull inflation.

Value of money is

  1. independent of the price level

  2. directly related to the price level

  3. inversely related to the price level

  4. cannot be determined

  5. None of these

Show answer
Correct Option: C

The process of deplation tends to favour

  1. debtor and creditiors a like

  2. debtor at the expense of creditors

  3. creditors at the expense of debtors

  4. profit receivers at the expense of fixed income receivers

Show answer
Correct Option: C

A customer does not require a bank account to obtain

  1. a loan

  2. a cheque book

  3. a banker's draft

  4. an overdraft

Show answer
Correct Option: C

When the commercial bank creates credit areas that are in effect, increases

  1. the national debt

  2. the supply of money

  3. the purchasing power of the rupee

  4. the real wealth of the country

Show answer
Correct Option: B

Which of the following statement is not completely true?

  1. An increase in the supply of money will result in inflation

  2. Cost inflation occurs when prices rise to cover increased factor costs

  3. Inflation occurs when the value of money declines

  4. Inflation will have the effect of redistributing incomes within a country

Show answer
Correct Option: A

Which of the following peoples is most likely to benefit from an inflationary situation?

  1. A person who buys units from the Unit Trust

  2. A person who keeps his savings under the floor at home

  3. A person who makes a large private loan to a friend

  4. A person who takes out a mortgage with a building society

Show answer
Correct Option: D

Which of the following is not a function of the Commercial Banks?

  1. Acting as a lender of last resort

  2. Lending to the private and public sectors

  3. The provision of a cheque system for setting debts

  4. The provision of safe deposit facilities

Show answer
Correct Option: A

A bank standing order would be suitable for paying

  1. telephone accounts

  2. electricity accounts

  3. grocery bills

  4. mortgage repayments

  5. None of these

Show answer
Correct Option: D

The Central Bank is not expected to perform the function of

  1. acting as a clearing house

  2. the banker to the government

  3. accepting deposit from Commercial Banks

  4. accepting deposits from general public

  5. None of these

Show answer
Correct Option: D

The major quantitative monetary tool available with the Central Bank is

  1. rationing of credit

  2. regulation of consumer credit

  3. margin requirements

  4. reserve ratio requirements

  5. None of these

Show answer
Correct Option: D

The current (2010) Bank Rate is

  1. 6%

  2. 8%

  3. 9%

  4. 9·5%

Show answer
Correct Option: A

Bank must refuse payment of a cheque, where

  1. cheque is not dated

  2. where cheque is stale i.e. date has expired

  3. payment has been stopped by the customer

  4. the cheque is not presented during working hours of bank

Show answer
Correct Option: C

When a cheque is returned by the bank marked 'Refer to Drawer', this means the drawer

  1. has instructed the bank not to pay the cheque

  2. whishes to be contacted before the cheque is cashed

  3. has improperly completed the cheque and must correct it before payment

  4. had insufficient funds in his account to pay the cheque

Show answer
Correct Option: D

It is compulsory for non-banking financing companies to get themselves registered with

  1. RBI

  2. SEBI

  3. Government of India

  4. NABARD

  5. None of these

Show answer
Correct Option: A

When the Central Bank sells securities,

  1. the purchasing power in the econonmy gets reduced

  2. the flow of credit is reduced

  3. the cash resources at the disposal of Commercial Banks get diminished

  4. All of the above

  5. None of these

Show answer
Correct Option: D
Explanation:

Selling and purchasing securities is the part of open market operations. By selling the securities in an economy, people will have less cash in hand,  reduced cash means reduced purchasing power, reduced purchasing power will result into  reduced credit flow in the economy and ultimately cash disposal of the banks will get diminished. 

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