Indian Economy Textbook Questions – Money · Reserve Bank of India · Monetary Policy · Inflation · Banking (Part 2)

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Indian Economy Textbook Questions – Money · Reserve Bank of India · Monetary Policy · Inflation · Banking (Part 2) – 20 questions, subject: Economy. Every question has the correct answer with a one-line explanation; tap "Show Answer". Free practice for TNPSC, UPSC, SSC, Bank and RRB exams – Shanmugam IAS Academy, Coimbatore.

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1.  
Match the following:
a. Deflation1. Stagnation with high prices
b. Disinflation2. Falling prices and money supply; unemployment
c. Stagflation3. Price rise from excess aggregate demand
d. Demand-pull4. Reducing the inflation rate without unemployment

Correct Answer: C [2 4 1 3]

Explanation:

Stagflation = stagnation + inflation; disinflation = fall in the rate.

2.  
Who are hit hardest during inflation?

Correct Answer: D [Fixed-income groups]

Explanation:

Incomes from salary, pension, interest and rent do not rise in step with prices.

3.  
Match (amalgamated bank – transferee bank):
a. Syndicate Bank1. Punjab National Bank
b. Allahabad Bank2. Canara Bank
c. Andhra Bank3. Indian Bank
d. Oriental Bank of Commerce4. Union Bank

Correct Answer: B [2 3 4 1]

Explanation:

Syndicate ➜ Canara; Allahabad ➜ Indian Bank; Andhra ➜ Union; Oriental ➜ PNB.

4.  
Which of the following statements are correct?
  1. DICGC deposit insurance is ₹5 lakh per depositor per bank.
  2. Payments banks can accept deposits but cannot lend.
  3. Basel III was implemented in India from 1.4.2013.

Correct Answer: A [1, 2, 3]

Explanation:

All three are correct.

5.  
Match (institution – year of establishment):
a. IFCI1. 1964
b. IDBI2. 1990
c. EXIM Bank3. 1948
d. SIDBI4. 1982

Correct Answer: D [3 1 4 2]

Explanation:

IFCI 1948; IDBI 1964; EXIM 1982; SIDBI 1990.

6.  
Which statement about NBFCs is INCORRECT?

Correct Answer: C [They can accept demand deposits]

Explanation:

NBFCs cannot accept demand deposits or issue cheques.

7.  
What is the sponsor bank's share in the capital of a Regional Rural Bank?

Correct Answer: B [35%]

Explanation:

Union 50%, sponsor bank 35%, State 15%.

8.  
Which statements about Tamil Nadu Grama Bank are correct?
  1. It was formed on 1.4.2019 by merging Pallavan and Pandyan Grama Banks.
  2. Its sponsor bank is Indian Bank.
  3. Its head office is in Chennai.

Correct Answer: A [1, 2 only]

Explanation:

The head office is in Salem, not Chennai.

9.  
Assertion (A): Under bimetallism the coin of higher metallic value disappears from circulation.
Reason (R): Since both carry the same face value, people hoard or melt the coin of higher metallic value.
கூற்று–காரண வினாக்களுக்கான தேர்வுகள்
(A) கூற்றும் காரணமும் சரி; காரணம் கூற்றுக்குச் சரியான விளக்கம்
(B) கூற்றும் காரணமும் சரி; ஆனால் காரணம் சரியான விளக்கம் அல்ல
(C) கூற்று சரி; காரணம் தவறு
(D) கூற்று தவறு; காரணம் சரி
Options for Assertion–Reason questions
(A) Both A and R are true; R is the correct explanation of A
(B) Both A and R are true; R is not the correct explanation of A
(C) A is true; R is false
(D) A is false; R is true

Correct Answer: A []

Explanation:

This is Gresham's law: bad money drives out good money.

10.  
Under the minimum reserve system, what is the minimum gold the RBI must hold?

Correct Answer: C [₹115 crore]

Explanation:

Total ₹200 crore (gold + foreign securities); of this, gold is ₹115 crore.

11.  
Assertion (A): Licensing of banks is a non-monetary function of the RBI.
Reason (R): It does not directly alter money supply or the volume of credit; it is for supervision of the banking system.

Correct Answer: A []

Explanation:

Bank licensing and deposit insurance = non-monetary functions.

12.  
A bank receives a deposit of ₹10,000; CRR is 4% and SLR 18%. What is the maximum available for lending?

Correct Answer: B [₹7,800]

Explanation:

₹400 (CRR) + ₹1,800 (SLR) = ₹2,200 locked up; 10,000 − 2,200 = ₹7,800.

13.  
Assertion (A): The inflation target is set by the Union Government.
Reason (R): Section 45ZA of the RBI Act empowers the Union Government to set the target once in five years in consultation with the RBI.

Correct Answer: A []

Explanation:

The RBI is responsible for meeting the target; the government sets it.

14.  
Assertion (A): Variable cash reserve ratio is an instrument of fiscal policy.
Reason (R): A higher cash reserve ratio reduces credit creation by commercial banks.

Correct Answer: D []

Explanation:

CRR is a monetary policy tool; the reason is true.

15.  
Assertion (A): To control inflation the government should cut tax rates.
Reason (R): Widening taxation reduces disposable income and aggregate demand.

Correct Answer: D []

Explanation:

During inflation taxes should be widened; the assertion is false.

16.  
With a reserve ratio of 25%, what total deposits can a primary deposit of ₹2,000 create?

Correct Answer: B [₹8,000]

Explanation:

Multiplier = 1 ÷ 0.25 = 4; 2,000 × 4 = ₹8,000.

17.  
Match the following:
a. SARFAESI1. Insolvency resolution, NCLT
b. IBC2. Deposit insurance
c. UPI3. Seizure of secured assets without courts
d. DICGC4. Instant payments run by NPCI

Correct Answer: C [3 1 4 2]

Explanation:

SARFAESI 2002; IBC 2016; UPI 2016 (NPCI); DICGC 1978.

18.  
Assertion (A): The Narasimham Committee (1991) recommended cutting the SLR from 38.5% to 25%.
Reason (R): A high SLR locks up banks' lendable funds in government securities.

Correct Answer: A []

Explanation:

Lower SLR = more lendable resources for banks.

19.  
Assertion (A): Under the Lead Bank Scheme one bank takes charge of each district.
Reason (R): The scheme began on the recommendation of the 1991 Narasimham Committee.

Correct Answer: C []

Explanation:

The scheme began in 1969 (Gadgil Study Group, Nariman Committee); the reason is false.

20.  
Assertion (A): NABARD is a refinance institution.
Reason (R): NABARD inspects Regional Rural Banks and State and District co-operative banks.

Correct Answer: B []

Explanation:

Both are true, but the inspection role does not explain the refinance role.

? Full lessons and explanations – Indian Economy PDF textbook (₹299): www.shanmugamiasacademy.in/study-materials/tnpsc-gs-unit-5-indian-economy

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