Case Study (1-4)
The Reserve Bank of India (RBI), cut Repo Rate to 4.4%, the lowest in at least 15 years. Also, it reduced the Cash Reserve Ratio (CRR) maintained by the banks for the first time in over seven years. CRR for all banks was cut by 100 basis points to release Rs. 1.37 lakh crores across the banking system. RBI Governor Dr. Shaktikanta Das predicted a bog global recession and said India will not be immune. It all depends on how India responds to the situation. Aggregate demand may weaken and ease core inflation.
The Economic Times; March 27th,2020
Q1) Cut in Repo rate by RBI is likely to___________ (increase/decrease) the demand for goods and services in the economy. (Choose the correct alternative)
Ans.) Increase.
Q2) Decrease in Cash Reserve Ratio will lead to____________? (Choose the correct alternative)
- Fall in aggregate demand
- No change in aggregate demand
- The rise in aggregate demand
- Fall in the general price level
Ans.) The rise in aggregate demand.
Q3) The difference by which actual Aggregate Demand exceeds the Aggregate Demand, required to establish full employment equilibrium is known as___________ (inflationary gap/deflationary gap). (Choose the correct alternative)
Ans.) Inflationary gap.
Q4) The impact of ‘Excess Demand’ under the Keynesian theory of income and employment, in an economy are: (choose the correct alternative)
- Decrease in income, output, employment and general price level
- Decrease in nominal income, but no change in real output
- Increase in income, output, employment and general price level
- No change in output/employment but an increase in the general price level
Ans.) No change in output/employment but an increase in the general price level
Case Study (5-8)
Heightened uncertainly in India caused by the coronavirus pandemic has led to a surge in currency in circulation as people hoard cash or park money inaccessible deposits to safeguard themselves against salary cuts or jobs losses. According to RBI data, India’s money supply rose
6.7% in the first five months of this year compared with the same period last year, the highest growth in seven years. The currency in circulation, which measures money with the public and in banks has also surged. A rise in money supply usually is seen as a leading indicator of growth in consumption and business investments. However, the growth in currency notes held by the public was much higher than the deposits made in banks. Since the end of March, currency held by the public rose 8.2% compared with a 4.1% increase in term deposits, the data showed. Savings and current account deposits fell 8% due to higher withdrawals.
Business World; October 20th,2020
Q5) ___________(Commercial banks/Central bank) is/are the financial institutions who accepts deposits from the public and advance loans to others.(Choose the correct alternative)
Ans.) Commercial Banks.
Q6) Money supply in India implies__________. (Choose the correct alternative)
- Currency held by the public
- Demand deposits with the banks
- Both (a) and (b)
- Neither (a) nor (b)
Ans) Both (a) and (b)
Q7) In India, Rs 1 currency note is issued by__________ (Reserve Bank of India/Ministry of Finance).( Choose the correct alternative)
Ans.) Ministry of Finance
Q8) Which bank in India is the controller of credit? (Choose the correct alternative)
- Axis bank
- Reserve Bank of India
- State Bank of India
- Punjab National Bank
Ans.) Reserve Bank of India
Case Study (9-12)
Currency with the public has reached a record high level of over Rs 18.5 lakh crore, more than double from a low of about Rs 7.8 lakh crore it had hit post-demonetization decision in late 2016, as per RBI data. At the same time, the total currency put in circulation by the Reserve Bank of India (RBI) has also more than doubled to over Rs 19.3 lakh crore, from a low of about Rs. 8.9 lakh crore post-demonetization. The total money supply, described ny the RBI, now stands at over Rs. 140 lakh crores, nearly 11% higher than the year-ago level. It stood at about Rs. 120 lakh crores during the demonetization period and was below Rs. 100 lakh crore level before Narendra Modi government came to power.
The M3 includes currency with the public, demand deposit of the public and the time deposits with the banking system.
Press Trust of India (PTI); June 10th, 2018
Q9) ___________(Time/Primary) deposits are the initial deposits with the commercial banks. (Choose the correct alternative)
Ans.) Primary.
Q10) Demand deposits include___________. (Choose the correct alternative)
- Saving account deposits with fixed deposits.
- Saving account deposits with current account deposits.
- Current account deposits with fixed deposits.
- All types of deposits.
Ans.) Saving account deposits with current account deposits.
Q11) ____________(Time/Demand) deposits are not included in the money supply of the country. (Choose the correct alternative).
Ans.) Time.
Q12) The condition(s) for an institution to become a bank is/are: (Choose the correct alternative)
- Accepting deposits
- Advancing loans
- Both (a) and (b)
- Neither (a) nor (b)
Ans.) Both (a) and (b)
Case Study (13-16)
The Goods and Services Tax (GST) revenue increased in September 2020, snapping a six-month decline caused by the spread of coronavirus disease pandemic and the subsequent lockdown, indicating that a recovery is underway in business activity as Asia’s third-largest economy opens up. GST collection rose to Rs. 96,480 crore last month, a 4% year-on-year rise. September marked the first time since March that GST revenue increased, an indicator that business activity is picking up in the economy as lockdown restrictions imposed to curb the spread of pandemic are eased. In the three months ended June. India’s economy posted a record 23.9% contraction as the lockdown shut many factories and businesses. GST collections are expected to grow in the coming festival and the government will be hoping to minimize its deficits/borrowing also.
Hindustan Times; October 2nd, 2020
Q13) The Goods and Services Tax (GST) is a_________(direct/indirect) tax. (Choose the correct alternative)
Ans.) Indirect
Q14) The incidence of tax refers to________. (Choose the correct alternative)
- Growth of taxation
- Way in which a tax is collected
- Level and rate of taxation
- Who ultimately bears the money burden of the tax
Ans.) Who ultimately bears the money burden of the tax
Q15) Direct tax is called direct tax because it is collected from the___________ (buyers of goods/income earners). (Choose the correct alternative)
Ans.) Income Earners
Q16) Which of the following sources of receipts in the government budget increases its liabilities? (Choose the correct alternative)
- Direct taxes
- Indirect taxes
- Disinvestment
- Borrowings
Ans.) Borrowings
Case Study (17-20)
In India, flattering sequential recovery, accelerating inflation, and a weal labor market will continue to act as an impediment to sustained economic revival. Capital goods and consumer durable goods have witnessed a negative growth rate in double digits. The government might also need to look at policies to boost consumption by the poor, who have a much higher Marginal Propensity to the consumer rather than thinking about the relatively well-off, such as government employees, who were the target of expenditure boosting measures. Overall, the amount of demand stimulus is underwhelming and we view the impact on both fiscal and growth as quite limited.
Hindustan Times; October 13th,2020
Q17) Refrigerator purchased by a confectionary shop is a _____________ (capital/ intermediate) good. (Choose the correct alternative)
Ans.) Capital
Q18) Which of the following is/are non-durable good(s)? (Choose the correct alternative)
- Milk
- Bread
- Both (a) and (b)
- None of these
Ans.) Both (a) and (b)
Q19) Real growth of an economy can only be measured through___________ (national income/ per capita income) at constant prices. (Choose the correct alternative)
Ans.) National Income
Q20) Goods purchased for the______________ purpose are final goods. (Choose the correct alternative)
- Satisfaction of wants
- Investment in firm
- Both (a) and (b)
- None of these
Ans.) Both (a) and (b)