[Finance and Management]

MCQs 3

#fiscal policy

1. If the aggregate supply curve is vertical in the long-run, _______ has (have) an effect on the
aggregate output in the long run
a) sometimes monetary and/or fiscal policy (i.e. it depends)
b) monetary policy does but fiscal policy does not
c) monetary policy does not but fiscal policy does
d) neither monetary policy nor fiscal policy

Answer: d

2. Employment tends to _______ when aggregate output ______

a) rise, falls
b) rise; rises
c) falls; rises
d) not change; falls

Answer: b

3. A bond is
a) a promise to pay back a loan over an unspecified period
b) allows the firm to access funds with mo liabilities
c) the only way a firm can raise funds
d) a document that promises to pay back a loan under specified terms over a specified
period of time

Answer: d

4. According to the supply-side model, a reduction in the tax rate

a) could reduce the size of any budget deficit
b) would have no effect on output
c) would have no effect on consumption
d) none of the above

Answer: a

5. The national (or federal) debt is

a. the same thing as the federal deficit.

b. the accumulation of all past deficits and surpluses.

c. less than it was in 1946 if adjusted for inflation.

d. held entirely by U.S. firms and households.

Ans- B. The deficit how much we borrow in a given year. The total of the deficits adds up to the
national debt.

6. When the unemployment rate increases the federal deficit

a. decreases.

b. increases.

c. is not affected

d. none of the above

Ans- B. Recessions bring about an increase in deficits for two reasons, first government receipts
go down because unemployed people do not pay taxes, second, government spending
increases as benefits increase.

7. According the budget philosophy known as functional finance

a. the budget should be balanced annually.

b. surpluses should be run during periods of prosperity and deficits should be run during
recessions.

c. the government should not worry about whether the budget is balanced and worry instead
about reaching the potential output level.

d. None of the above

Ans- C. Functional finance is a budget philosophy aiming fiscal policy at achieving potential
GDP rather than balancing budgets either annually or over the business cycle.

8. Which one of the following is not one of the concerns most often expressed about the
effectiveness of fiscal policy?

a. The difficulty of estimating the natural rate of unemployment.

b. The time lags involved in implementing fiscal policy.

c. An increase in aggregate demand tends to worsen unemployment.

d. None of the above

Ans- C. An increase in aggregate demand will cause an increase in employment.

#mix

Set 1

a) Which of the following cannot be called as a debt instrument as referred in the

financial transactions?

a) Certificate of deposit;
b) Bonds;
c) Stocks;
d) Commercial papers;
e) Debentures

Answer: c

02. Whenever RBI does some open market operation transactions, actually it wishes to
regulate which of the following?

a) Inflation;
b) Liquidity in economy;
c) Borrowing powers of the banks;
d) Flow of foreign direct investments;
e) None of the above
Answer: a

03. in economics, it is generally believed that the main objective of a public sector
financial company like bank is to:

a) Employ more and more people;

b) Maximize the total profits;
c) Maximize total production;
d) Provide financial services to the people of the nation of its origin across the country;
e) Sell the goods at subsidized rates

Answer: b
04. In a company by the use of price sensitive corporate information about
the company, people closer to the company try to adopt the technology to make gains
or cover losses in share market dealings and such process is known as:

a) Insider trading;
b) Future trading;
c) Foreign trading;
d) Stock trading;
e) None of these

Answer: a

05. What is meant by Repo rate?

a) When a bank is in need of cash it can it can discount bills of exchange and avail loan
facilities from Reserve Bank of India.
b) When a bank has excess cash, they buy securities from RBI against cash on the condition
that they resell the securities to RBI on a pre fixed day and price
c) It is rate at which RBI allows temporary loan facilities to commercial banks against
government securities on the condition that the bank will repurchase the securities within a short
period.
d) It is a rate which is offered by banks to their most valued customers or prime customers;
e) None of these

Answer: c

06. Bharat Nirman does not cover which of the following areas?

a) Rural employment;
b) Rural housing
c) Rural water supply;
d) Irrigation facilities;
e) It covers all the above areas

Answer: e
07. Which of the following committee has given its recommendations on Financial
inclusions?

a) Rakesh Mohan committee;

b) Rangarajan committee;
c) Sinha committee;
d) Gadgil committee;
e) None of these

Answer: c
08. The actual return of an investor is reduced sometimes when the prices of the
commodities go up all of a sudden and in financial sector this type of phenomenon is
known as
a) Probability risk;
b) Market risk;
c) Inflation risk;
d) Credit risk;
e) None of these

Answer: a

09. An industry which is fighting hard to increase its market share in existing market
(with new popular products) is known as:

a) Market vendor;
b) Market operator;
c) Market leader;
d) Market follower;
e) Market challenger

Answer: e

10. Which of the following products launched by most of the banks help farmers in
getting instant credit for various agricultural purposes?

a) Kisan credit card;

b) Personal loan;
c) Business loan;
d) ATM card;
e) None of these
11. Which of the following products of a bank is specifically designed to provide
financial help to children in their higher studies in India or in a foreign country?
a) Personal loan;
b) Corporate loan;
c) Housing loan;
d) Educational loan;
e) Mortgage loan

12. Which of the following policies of the financial sectors is basically designed to
transferring local financial assets into foreign assets freely and at market determined
exchange rates?

a) Capital account convertibility;

b) Financial deficit management;
c) Minimum support price;
d) Restrictive trade practices
e) None of these

13. A customer is willing to purchase some US dollars in the country. He/she should go
to:

a) Public Debt Division of the RBI only;

b) American Express Bank only;
c) RBI or any branch of a bank which is authorized for conducting such business;
d) Ministry of Foreign affairs;
e) None of these

14. Which of the following is not a social assistance program launched by the
Government of India?

a) National old age pension scheme;

b) Annapurna scheme;
c) National family benefit scheme;
d) Indira Gandhi National Disability Pension Scheme;
e) All are social assistance programs

15. Many times we see in newspapers that some projects are launched by the
Government authorities on PPP basis. What is the full form of PPP?
a) Preferential Payment Plan;
b) Public Private partnership;
c) Partial payment project;
d) Popular private project
e) Public private plan
 16. The ratio of the cash reserves that the banks are required to keep with RBI is known
as:
a) Liquidity ratio;
b) Statutory liquidity ratio;
c) Cash Reserve Ratio;
d) Net demand and time liabilities;
e) None of these

17. The availability of cash and other cash like marketable instruments that are useful
in purchases and investments are commonly known as:

a) Cash crunch;
b) Liquidity;
c) Credit;
d) Marketability;
e) none of these

18. Which of the following schemes launched by the Government of India provides a
guaranteed 100 days employment to rural employment seekers in India?

a) Bharat Nirman;
b) Swarnajayanti Grameen Rozgar Yojana;
c) Mahatma Gandhi National Rural Employment Guarantee act;
d) National Food for Work Programme;
e) None of these

19. The Reserve Bank of India keeps on modifying various rates/ratios to keep the flow
of liquidity in the market in a balanced manner and which of the following
rates/ratios/indexes is not directly controlled by the RBI?

a) Cash reserve ratio;

b) Bank rate;
c) Repo rate;
d) reverse repo rate;
e) Wholesale price index

20. Many banks have adopted/launched Core Banking Solutions and what do you
mean by core banking solutions?

a) A marketing strategy adopted by the banks;

b) A new type of automated teller machines useful for rural population;
c) A delivery channel for quick and fast delivery;
 d) A new product launched to help senior citizens only as they are not able to visit the
branches/ATMs frequently;
e) e) None of these

21. Which of the following terms are not used in banking sector?

a) Statutory liquidity ratio;

b) Non performing asset;
c) Credit rating;
d) Fixed;
e) REPO

22. Banking sector comes under which of the following sectors?

a) Agriculture sector;
b) Service sector;
c) Manufacturing sector;
d) Industrial sector;
e) None of these

23. An account in which trading of shares in their electronic form is done is known as:

a) Demat account;
b) NRE account;
c) NRO account;
d) FCNR account;
e) RFC account

24. Which of the following programmes/schemes of the Government of India is not

directly related with agriculture activities?

a) Drought Prone areas programme;

b) Promotion of integrated pest management;
c) Integrated wastelands development programme;
d) Annapurna scheme;
e) Desert Development programme

25. Find the odd man out from the following groups?

a) ICICI Bank, Canara Bank, Central Bank of India, Punjab National Bank, Indian Bank
b) Canara Bank, State Bank of India, Lakshmi Vilas Bank, Karur Vysya Bank, United Bank of
India
c) Bank of India, Corporation Bank, Indian Bank, IDBI Bank, Axis bank
d) Bank of Maharashtra, Barclays bank, Oriental Bank of Commerce, Indian Bank, IDBI
bank
e) Union Bank of India, Bank of India, Andhra Bank, Dena Bank, Indian Bank

26. Which among the following is the recently opened private sector bank in the
country?

a) ICICI bank;
b) HDFC bank;
c) AXIS Bank;
d) Kotak Mahindra Bank;
e) Yes bank

27. Mortgage relates to which type of loan among the following?

a) Housing loan;
b) Educational loan;
c) Car loan;
d) Gold loan;
e) Personal loan

28. Fourteen banks were nationalized in the country during the first stage on:

a) 19.07.1970;
b) 19.07.1969;
c) 19.07.1971;
d) 18.07.1969;
e) 15.07.1969

29. the sponsorship between State government, central government and sponsor bank
is in the ratio of--------- in respect of Regional Rural Banks in the country:

a) 15-50-35;
b) 50-35-15;
c) 35-15-50;
d) 35-50-15;
e) 15-35-50

30. When it comes to providing locker facility to the customer of any bank, the
relationship between the customer and banker is that of:
 a) Debtor and creditor; b) Bailor and bailee; c) Lessee and lessor; d) Lessor and lessee;
e) Agent and principal

Set 2

01. When does Reserve Bank of India issue annual policy statement?

a) January;
b) April;
c) July;
d) October;
e) None of the above

Answer: b

02. Which of the following has been renamed as Annual Policy Statement by the
Reserve Bank of India?

a) Busy season banking policy;

b) Slack season banking policy;
c) Monetary and credit policy;
d) Annual statistical report;
e) None of the above

Answer: c

03. When does RBI review its annual policy statement?

a) July;
b) October;
c) January;
d) All the above;
e) None of the above

Answer: d

04. Which is the monitoring and reviewing authority regarding fair practices code as
per recent annual policy statement of Reserve Bank of India?
 a) Banking codes and standards Board of India;
b) Banking Ombudsman;
c) Institute for development in banking technology;
d) Debt recovery tribunal;
e) None of the above

Answer: a

05. Which committee has recommended introduction of smart card?

a) Rangarajan committee;
b) Saraf committee;
c) Nayak committee;
d) Pannirselvan committee;
e) None of the above

Answer: B

06. Which committee had formulated consultative profile in connection with electronic
funds transfer?
a) A.K. Purwar committee;
b) Y V Reddy committee;
c) K S Shere committee;
d) S. A. Dave committee;
e) None of the above

Answer: c

07. the process of transformation of physical shares, commercial paper or certificate of

deposit into electronic form is called as:
a) Electronic clearing service;
b) Electronic securitization;
c) Share truncation;
d) Dematerialization;
e) None of the above

Answer: d
08. Providing banking services to a customer without his entrance inside the banks
branch is called as:

a) Virtual banking;
b) relationship banking;
c) universal banking;
d) mobile banking;
e) none of the above

Answer: a

09. Where is the headquarters of Society for worldwide Interbank Financial

Telecommunication SWIFT situated?

a) New York;
b) Los Angels;
c) Brussels;
d) Hague;
e) None of the above

10. Where has National Financial Switch of IDRBT established?

a) Mumbai;
b) New Delhi;
c) Hyderabad;
d) Bangalore;
e) None of the above

11. Cheque truncation means:

a) Tearing a cheque into two or more pieces;
b) Sending the photostat copy of a cheque in collection;
c) Using the electronic image of a cheque;
d) Keeping the Photostat copy of a cheque with collecting bank before sending the original
cheque to the drawee branch;
e) None of the above

12. What do you mean by universal banking?

a) Provision of all financial services in one country;
b) Provision of all financial services in one bank;
c) Provision of all financial services at a branch;
d) Provision of all financial services at any of the counters of a branch of a bank;
e) None of the above
13. Corporate governance is a system
a) By which a company is directed and controlled;
b)In which Board of directors are responsible for managing the business affairs of a company;
c) Both the above;
d) Governing corporate companies by the government;
e) None of the above

14. Whose interest is kept in mind in a good corporate governance system?

a) Shareholders of the company;
b) Stakeholders of the company;
c) Employees of the company;
d) All the above;
e) None of the above

15. What do you mean by risk?

a) Loss;
b) Depreciation of capital;
c) Decrease in profitability;
d) Possible loss that depends upon occurrence and non occurrence of an incident;
e) None of the above

16. The employees of the bank went on strike and when it comes to risk what do you
mean by this?

a) Operational risk;
b) Employee risk;
c) Credit risk;
d) Market risk;
e) Systemic risk

17. Basel II accord is mostly concerned with:

a) Central vigilance commission;

b) Non performing assets;
c) Capital adequacy ratio;
d) Foreign direct investment;
e) None of the above

Answer: c
18. A bank is unable to pay its short term deposits because the banks funds are blocked
in long term investments. The risk derived in this case is known is:

a) Market risk;
b) Operational risk;
c) Liquidity risk;
d) Interest rate risk;
e) None of the above

Answer: c

19. A bank recently introduced a new deposit scheme which was not popular amongst
the public and what do you mean by the risk associated with this?

a) Operations risk;
b) Credit risk;
c) Liquidity risk;
d) Market risk;
e) None of the above

Answer: d

20. The Assets Liabilities committee in a bank makes the assessment of:

a) Liquidity risk;
b) Credit risk;
c) Operations risk;
d) All the above;
e) None of the above

Answer: a

21. A debtor makes default in repayment of a bank loan and which type of risk is this for
a lending bank?

a) Liquidity risk;
b) Operational risk;
c) Interest rate risk;
d) Credit risk;
e) None of the above

Answer: d

22. Which type of risk arises before a bank that trades in government securities?

a) Liquidity risk;
b) Market risk;
c) Credit risk;
d) Trade risk;
e) None of the above

Answer: b

23. Which of the following options best defines the risk?

a) Loss occurred due to happening of an event

b) Loss occurred due to non happening of an event
c) Risk experienced due to uncertainty
d) Probability of loss due to uncertainty
e) None of the above

Answer: d

24. Which of the following is not included in three pillars of BASEL capital accord?

a) Minimum capital requirement;

b) Supervisory review;
c) Market discipline;
d) Core banking solution;
e) None of the above

Answer: d
25. When ICICI Limited merged with ICICI bank?

a) 1st August, 2000;

b) 1st August 2001;
c) 1st August, 2002;
d) 1stAugust, 2003;
e) none of the above

Answer: c

26. Bank of Madura Limited merged with:

a) ICICI bank limited;

b) UTI bank limited;
c) HDFC bank limited;
d) IDBI bank
e) None of the above

Answer: a

27. Which bank has changed its name to AXIS bank limited?

a) Centurion bank;
b) Times bank;
c) Bank of Punjab Limited;
d) Bank of Karad;
e) UTI bank limited

Answer: E

28. Bank of Cochin merged with:

a) Punjab National Bank;

b) Bank of Baroda;
c) State Bank of India;
d) Canara Bank;
e) United Commercial bank

Answer: c

29. Times Bank Limited merged with:

a) HDFC Bank;
b) Bank of India;
c) Punjab National Bank;
d) Central Bank of India;
e) None of the above

Answer: a

30. What do you mean by horizontal merger?

a) Merger of two or more companies that manufacture homogenous products;

b) Merger of two or more companies that manufacture heterogonous products;

c) Merger of a principal company with its subsidiary company
d) All the above
e) None of the above

Answer: a

31. Which bank announces acquisition of Grama Vidiyal Microfinance recently?

a. Axis
b. IDFC
c. ICICI
d. HDFC

Answer: b

All the best by Ur GKbuddy Suryansh