Static Quiz 14 December 2024 (Economy)
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Static Quiz 14 December 2024 (Economy) For UPSC Exam
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- Question 1 of 5
1. Question
Which of the following statements are true regarding Priority Sector Lending (PSL) in India?
1. The PSL guidelines mandate that banks allocate a certain percentage of their loans to specified sectors such as agriculture and micro-enterprises.
2. Medium Enterprises and Renewable Energy are not considered part of the priority sector.
3. The targets for PSL are applicable to both domestic and foreign banks operating in India.
4. PSL targets for Weaker Sections are set at 10% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet Exposure.
CorrectAnswer: b) 1, 3, and 4 only
Explanation:
Statement 1: Correct. PSL requires banks to allocate a specific percentage of loans to sectors such as agriculture, micro-enterprises, and weaker sections.
Statement 2: Incorrect. Medium Enterprises and Renewable Energy are considered part of the priority sector.
Statement 3: Correct. PSL targets apply to both domestic and foreign banks in India.
Statement 4: Correct. The PSL target for weaker sections is 10% of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure.
IncorrectAnswer: b) 1, 3, and 4 only
Explanation:
Statement 1: Correct. PSL requires banks to allocate a specific percentage of loans to sectors such as agriculture, micro-enterprises, and weaker sections.
Statement 2: Incorrect. Medium Enterprises and Renewable Energy are considered part of the priority sector.
Statement 3: Correct. PSL targets apply to both domestic and foreign banks in India.
Statement 4: Correct. The PSL target for weaker sections is 10% of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure.
- Question 2 of 5
2. Question
What is “short selling” in the context of stock trading?
CorrectAnswer: b) The selling of shares that the seller does not own, with the intention of buying them back at a lower price
Explanation:
Short selling involves selling shares the seller does not currently own, typically borrowing them from a broker. The seller aims to repurchase the shares at a lower price in the future, profiting from the price difference. It is a strategy used when expecting a decline in stock prices.IncorrectAnswer: b) The selling of shares that the seller does not own, with the intention of buying them back at a lower price
Explanation:
Short selling involves selling shares the seller does not currently own, typically borrowing them from a broker. The seller aims to repurchase the shares at a lower price in the future, profiting from the price difference. It is a strategy used when expecting a decline in stock prices. - Question 3 of 5
3. Question
What is a promissory note in the context of financial instruments?
CorrectAnswer: a) A written promise to pay money
Explanation:
A promissory note is a financial instrument containing a written promise by one party (the maker) to pay a definite sum of money to another party (the payee) either on demand or at a future date. It formalizes obligations in loans and financial transactions.IncorrectAnswer: a) A written promise to pay money
Explanation:
A promissory note is a financial instrument containing a written promise by one party (the maker) to pay a definite sum of money to another party (the payee) either on demand or at a future date. It formalizes obligations in loans and financial transactions. - Question 4 of 5
4. Question
What is the impact of a decrease in bond prices when interest rates rise?
CorrectAnswer: c) Bond prices decrease
Explanation:
When interest rates rise, existing bonds with lower fixed interest rates become less attractive to investors. As a result, the prices of these bonds decrease to adjust to the higher interest rate environment. This inverse relationship between bond prices and interest rates is a fundamental concept in bond markets.IncorrectAnswer: c) Bond prices decrease
Explanation:
When interest rates rise, existing bonds with lower fixed interest rates become less attractive to investors. As a result, the prices of these bonds decrease to adjust to the higher interest rate environment. This inverse relationship between bond prices and interest rates is a fundamental concept in bond markets. - Question 5 of 5
5. Question
Which one of the following activities of the Reserve Bank of India is considered to be part of ‘sterilization’?
CorrectAnswer: (a) Conducting ‘Open Market Operations’
Explanation:
Open Market Operations (OMOs) are used by the RBI to either inject or absorb liquidity from the banking system to maintain monetary stability. By purchasing or selling government securities, the RBI can control the amount of money in circulation, counteracting the effects of foreign exchange operations.IncorrectAnswer: (a) Conducting ‘Open Market Operations’
Explanation:
Open Market Operations (OMOs) are used by the RBI to either inject or absorb liquidity from the banking system to maintain monetary stability. By purchasing or selling government securities, the RBI can control the amount of money in circulation, counteracting the effects of foreign exchange operations.
