Macro Economic Environment MBA 2018-20

2.

Which of the following instrument is not used by RBI

Bank rate
CRR
SLR
Repo rate
Reverse repo rate

Correct Answer

A. Bank rate

Explanation

The bank rate is not used by the RBI. The bank rate is the rate at which the central bank lends money to commercial banks. However, the RBI does not use the bank rate as a tool for monetary policy anymore. Instead, it uses other instruments such as the repo rate, reverse repo rate, CRR, and SLR to regulate liquidity and interest rates in the economy.

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3.

Phillips curve shows relationship between

Inflation rate and unemployment rate
Wage rate and inflation rate
Wage rate and unemployment rate
inflation rate and interest rate
Inflation rate and real interest rate

Correct Answer

A. Inflation rate and unemployment rate

Explanation

The Phillips curve shows the relationship between the inflation rate and the unemployment rate. It suggests that when the unemployment rate is low, inflation tends to be high, and vice versa. This is because when there is low unemployment, workers have more bargaining power and can demand higher wages, which leads to increased production costs and ultimately higher inflation. On the other hand, when unemployment is high, there is less pressure on wages, leading to lower inflation.

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4.

speculative demand for money is a function of

Income
Price level
Rate of interest
Wealth
Income and interest rate

Correct Answer

A. Rate of interest

Explanation

The speculative demand for money is a function of the rate of interest. This means that individuals hold money not only for transactions but also as an investment. When the rate of interest is high, people are more likely to hold money in the form of investments rather than spending it, resulting in a decrease in the speculative demand for money. Conversely, when the rate of interest is low, people are more likely to spend their money rather than investing it, leading to an increase in the speculative demand for money.

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5.

Stagflation refers to

High unemployment and high inflation rate
High unemployment and low wage rate
Full employment and high wage rate
Low employment and low wage rate
High inflation rate and high interest rate

Correct Answer

A. High unemployment and high inflation rate

Explanation

Stagflation refers to a situation where there is a high level of unemployment and a high level of inflation at the same time. This is a unique and challenging economic condition because typically inflation and unemployment have an inverse relationship. Stagflation can occur when there is a decrease in aggregate supply, leading to higher prices and unemployment. It is characterized by stagnant economic growth, rising prices, and a lack of job opportunities. This can be caused by factors such as supply shocks, government policies, or international events.

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6.

RBI anchors inflation rate through

CPI
WPI
GDP deflator
Producer inflation
Repo rate

Correct Answer

A. CPI

Explanation

The correct answer is CPI because the Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. It is used by the Reserve Bank of India (RBI) to anchor the inflation rate, as it reflects the changes in the cost of living for consumers. By monitoring the CPI, the RBI can assess the level of inflation in the economy and take appropriate measures, such as adjusting interest rates, to control inflation and maintain price stability.

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7.

If rupee depreciates

RBI sells the $
Purchase $
Decrease the repo rate
Deficit financing
Capital inflow happens

Correct Answer

A. RBI sells the $

Explanation

When the rupee depreciates, it means that the value of the rupee decreases in relation to the dollar. In order to stabilize the currency, the Reserve Bank of India (RBI) sells dollars from its reserves. By selling dollars, the RBI increases the supply of dollars in the market, which helps to strengthen the rupee. This action is taken to prevent further depreciation of the rupee and maintain stability in the foreign exchange market.

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8.

Which of the following is not deteriminat of exchange rate

Net capital flow
Inflation rate
Interest rate
Purchasing power parity
National income or output

Correct Answer

A. National income or output

Explanation

National income or output is not a determinant of exchange rate. Exchange rate is primarily influenced by factors such as net capital flow, inflation rate, interest rate, and purchasing power parity. National income or output refers to the total value of goods and services produced in a country, and while it may indirectly affect exchange rates through its impact on other determinants, it is not a direct determinant itself.

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9.

MSF

Special window for banks
Special window for corporates
Special window for govt
Special window for RBI
Special window for World bank

Correct Answer

A. Special window for banks

Explanation

The term "special window for banks" refers to a specific facility or arrangement provided by an institution or organization (such as the government or the central bank) to banks. This special window is designed to provide additional support, funding, or assistance to banks during times of financial stress or crisis. It may involve offering loans at preferential rates, providing liquidity support, or implementing specific measures to stabilize the banking sector. This special window aims to ensure the stability and functioning of the banking system and prevent any potential systemic risks.

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10.

RBI has control over the

Demand side
Supply side
Taxes of the govt
Expediture of the govt
Both demand and supply side

Correct Answer

A. Demand side

Explanation

The correct answer is demand side. The Reserve Bank of India (RBI) has control over the demand side of the economy. This means that it can influence factors such as interest rates, credit availability, and money supply to regulate the overall demand for goods and services in the economy. By managing the demand side, the RBI aims to achieve price stability and promote economic growth.

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Macro Economic Environment MBA 2018-20

The high power money supplied by

Quiz Preview

Which of the following instrument is not used by RBI

Phillips curve shows relationship between

speculative demand for money is a function of

Stagflation refers to

RBI anchors inflation rate through

If rupee depreciates

Which of the following is not deteriminat of exchange rate

MSF

RBI has control over the