SECTION - A (20 questions out of 24 questions to be attempted)
Q.1 Which of the following is / are advantage(s) of having sole authority of currency issue with Central Bank ? (a) Develops trust in the banking system. (b) Uniformity in currency issue. (c) Management of money supply in the economy. '(d) All of the Above.
Q.2 If CRR IS 10 % and SLR is 15%, value of money multiplier will be: (a) 2 (b) 3 - (c) 4 (d) Can't be determined.
Q.3 In a government budget ,estimated receipts exceed estim ed expenditures during a fiscal year, this situation can be used to deal with which of the following situation? (a) Inflation (b). Deflation (c) Both (a) and (b) (d) Neither (a) nor (b)
Answers
Answer: Central Bank has the sole authority for issue of currency in the country. In India, Reserve Bank of India (RBI) has the sole right of issuing paper currency notes (except one-rupee notes and coins, which are issued by Ministry of Finance). All the currency issued by the Central Bank is its monetary liability, i.e. Central Bank is obliged to back the currency with assets of equal value, to enhance the public confidence in paper currency.
Advantages of Sole Authority of Note issue with RBI:
(i) It leads to uniformity in note circulation.(ii) It gives the central bank power to influence money supply because currency with public is a part of money supply. (iii) It enables the government to have supervision and control over the central bank with respect to issue of notes. (iv) It ensures public faith in the currency system. (v) It helps in stabilization of internal and external value of currency.
Explanation:
Answer:
1. (d)
2. (c) 4 [formula= 1/LRR , LRR= CRR+SLR]
3. (a)