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Question 1 of 5
1. Question
1 pointsConsider the following statements regarding Call money rate.
1. Banks resort to Call money loans to fill the asset liability mismatch, comply with the statutory CRR and SLR requirements and to meet the sudden demand of funds.
2. Demand and supply of liquidity affect the call money rate.
3. Only RBI and banks are the participants of the call money market.
Which of the above statements is/are correct?Correct
Statements 1 and 2 are correct.
Call money rate is the rate at which short term funds are borrowed and lent in the money market.
The duration of the call money loan is 1 day. Banks resort to these types of loans to fill the asset liability mismatch, comply with the statutory CRR and SLR requirements and to meet the sudden demand of funds. RBI, banks, primary dealers etc are the participants of the call money market. Demand and supply of liquidity affect the call money rate. A tight liquidity condition leads to a rise in call money rate and vice versa.Incorrect
Statements 1 and 2 are correct.
Call money rate is the rate at which short term funds are borrowed and lent in the money market.
The duration of the call money loan is 1 day. Banks resort to these types of loans to fill the asset liability mismatch, comply with the statutory CRR and SLR requirements and to meet the sudden demand of funds. RBI, banks, primary dealers etc are the participants of the call money market. Demand and supply of liquidity affect the call money rate. A tight liquidity condition leads to a rise in call money rate and vice versa. -
Question 2 of 5
2. Question
1 pointsTax buoyancy refers to the responsiveness of tax revenue growth to changes in GDP. If there is an output growth and the tax buoyancy is not commensurate, then it can imply
Correct
Tax buoyancy explains this relationship between the changes in government’s tax revenue growth and the changes in GDP. It refers to the responsiveness of tax revenue growth to changes in GDP. When a tax is buoyant, its revenue increases without increasing the tax rate.
Incorrect
Tax buoyancy explains this relationship between the changes in government’s tax revenue growth and the changes in GDP. It refers to the responsiveness of tax revenue growth to changes in GDP. When a tax is buoyant, its revenue increases without increasing the tax rate.
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Question 3 of 5
3. Question
1 pointsIncome tax in India is
Correct
The income-tax is levied and collected by the Centre but its proceeds are distributed between the Centre and the states.
Incorrect
The income-tax is levied and collected by the Centre but its proceeds are distributed between the Centre and the states.
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Question 4 of 5
4. Question
1 pointsExternal Aids is the best means to finance a government’s fiscal deficit because
1. It brings in foreign currency that is also useful to bridge the Balance of payments (BoP) apart from its utility in developmental expenditures.
2. It does not cause crowding out effect in the domestic market and is favourable to the domestic borrowers.
Which of the above statements is/are correct?Correct
Both statements 1 and 2 are correct.
If external aid is a grant or coming without interest, no better way to finance the deficit, if we ignore their inflationary effects.
When the domestic market has limited amount of funds, and if the government desires to borrow a large share of it to finance the fiscal deficit, it tends to raise the demand for funds in the market. This shoots the market interest rate for the funds and causes problems to the domestic investors who now have to pay a higher interest rate to avail the same loan.
If the same money is borrowed from abroad, the crowing out effect doesn’t occur.Incorrect
Both statements 1 and 2 are correct.
If external aid is a grant or coming without interest, no better way to finance the deficit, if we ignore their inflationary effects.
When the domestic market has limited amount of funds, and if the government desires to borrow a large share of it to finance the fiscal deficit, it tends to raise the demand for funds in the market. This shoots the market interest rate for the funds and causes problems to the domestic investors who now have to pay a higher interest rate to avail the same loan.
If the same money is borrowed from abroad, the crowing out effect doesn’t occur. -
Question 5 of 5
5. Question
1 pointsMatch the following pairs
Term Definitions
1. Deflation A. Reduction in the rate of inflation
2. Disinflation B. General fall in the level of prices
3. Stagflation C. Combination of inflation and rising unemployment due to recession
4. Reflation D. Attempt to raise the prices to counteract the deflationary prices.
Select the correct answer codeCorrect
Option b is correct.
Incorrect
Option b is correct.
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