Q1. Which of the following are considered high-powered money (HPM) or monetary base?
- Currency with public
- Bank deposits with RBI
- Coins in circulation
(a) 1 and 2 only
(b) 1 and 3 only
(c) 1, 2 and 3
(d) 2 and 3 only
Correct Answer: (c) 1, 2 and 3
Explanation:
- HPM = currency in circulation + coins + commercial bank reserves with RBI.
- Basis for money supply creation.
Q2. Which of the following statements about Inflation Indexing are correct?
- It adjusts the value of payments to account for inflation.
- It reduces the real value of fixed income during inflation.
- It is applied in government securities and pensions.
(a) 1 and 3 only
(b) 2 only
(c) 1, 2 and 3
(d) 1 only
Correct Answer: (a) 1 and 3 only
Explanation:
- Inflation indexing → protects against inflation for pensions, G-sec returns.
- Reduces risk of purchasing power loss.
Q3. Which of the following is/are examples of supply-side measures to control inflation?
- Increasing interest rates
- Reducing indirect taxes
- Enhancing agricultural production
- Reducing government expenditure
(a) 2 and 3 only
(b) 1 and 4 only
(c) 1 and 3 only
(d) 2, 3 and 4 only
Correct Answer: (a) 2 and 3 only
Explanation:
- Supply-side measures → improve supply or reduce production cost.
- Interest rate and fiscal expenditure → demand-side measures.
Q4. Consider the following statements:
- Foreign Direct Investment (FDI) leads to equity inflow and managerial control.
- Foreign Portfolio Investment (FPI) is short-term investment in stocks and bonds without control.
- FDI is riskier than FPI due to long-term commitment.
Which of the statements is/are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1, 2 and 3
(d) 1 and 3 only
Correct Answer: (c) 1, 2 and 3
Explanation:
- FDI = long-term, equity + management participation.
- FPI = portfolio investments, liquid, short-term.
- FDI → higher risk exposure due to long-term commitment.
Q5. Which of the following is/are indicators of economic growth?
- Increase in per capita income
- Increase in Gross Domestic Product (GDP)
- Employment generation
- Reduction in fiscal deficit
(a) 1 and 2 only
(b) 1, 2 and 3 only
(c) 2, 3 and 4 only
(d) 1, 2, 3 and 4
Correct Answer: (b) 1, 2 and 3 only
Explanation:
- Economic growth → sustained increase in output, income, and employment.
- Fiscal deficit reduction → fiscal stability, not direct growth indicator.
