Question

The Reserve Bank of India was established in which year?

• A. 1935
• B. 1934
• C. 1951
• D. 1949
• A. Open market operations
• B. Fiscal spending
• C. Variations in reserve ratios
• D. Bank rate
• A. It is the custodian of the foreign exchange reserves of the company
• B. It also acts as a bank to the banking system
• C. It directly deals with the public
• D. It controls money supply of the country through various methods like bank rate, open market operations and variations in reserve ratios
• A. High-powered money
• B. Monetary base
• C. Special Drawing Rights
• D. Reserve money
• A. Convenient unit of account
• B. Store of value
• C. A medium of exchange
• D. Reserve money
• A. Political instability
• B. Over-dependence on remittances and foreign aid
• C. Volatile performance of agriculture
• D. Mixed economic system

Answer 1

The Correct Option is A

The Reserve Bank of India (RBI) was established in 1935 under the RBI Act of 1934.

Answer 2

The Reserve Bank of India (RBI) was established in 1935 under the Reserve Bank of India Act of 1934. The RBI was set up to regulate the issue of currency and manage the monetary policy of the country. It serves as the central bank of India, playing a crucial role in shaping the country's economic framework.

Initially, the RBI was created to address the financial challenges faced by the country during the colonial period and to manage the economic affairs independently after India’s independence. It has since evolved into the primary authority for the regulation of financial institutions, overseeing the banking sector, managing inflation, and ensuring financial stability.

Over the years, the RBI has been instrumental in promoting economic development, managing the country's foreign exchange reserves, and ensuring that the financial system remains resilient in times of economic turbulence.

Answer 3

Fiscal spending is a part of fiscal policy controlled by the government, not the RBI, which focuses on monetary policy measures.

Answer 4

Fiscal spending is a component of fiscal policy and is controlled by the government, not the Reserve Bank of India (RBI). Fiscal policy involves government decisions related to taxation, public spending, and borrowing, aimed at managing the economy by influencing aggregate demand, employment, and inflation.

While fiscal policy is the responsibility of the government, the RBI primarily focuses on monetary policy measures, which involve regulating money supply, interest rates, and inflation to stabilize the economy. The RBI’s role includes controlling inflation, managing currency circulation, and ensuring the financial system's overall health.

Therefore, while fiscal policy and fiscal spending are directly linked to the government’s budgetary decisions, the RBI's function is to implement measures that influence the economy's liquidity, credit availability, and overall financial stability.

Answer 5

The RBI does not directly deal with the public; it regulates commercial banks, which manage public transactions.

Answer 6

The Reserve Bank of India (RBI) does not directly interact with the public; rather, it regulates commercial banks that manage public transactions. The RBI's primary function is to act as the central bank, overseeing the banking system, maintaining financial stability, and implementing monetary policy measures to control inflation and ensure economic stability.

Commercial banks, on the other hand, directly serve the public by providing services such as loans, deposits, and payment services. These banks are regulated by the RBI to ensure that they follow proper financial practices, maintain adequate capital reserves, and operate in a safe and sound manner.

In essence, the RBI’s role is to supervise and guide commercial banks, ensuring that they meet the regulatory requirements while safeguarding the interests of the public through the banking system. The RBI plays a critical role in maintaining the overall health of the financial sector, even though it does not engage directly with individual customers.

Answer 7

Special Drawing Rights (SDRs) are an international reserve asset managed by the IMF, not a term for central bank-issued currency.

Answer 8

Special Drawing Rights (SDRs) are an international reserve asset created by the International Monetary Fund (IMF) and are not a form of central bank-issued currency. SDRs are used to supplement member countries' official reserves and provide liquidity to the global economy, particularly during times of financial crisis or when there is a shortage of international reserves.

Unlike traditional currencies, SDRs are not physical money but rather an accounting unit used in the IMF’s operations. They can be exchanged between member countries for freely usable currencies, such as the US dollar, euro, or yen, through voluntary transactions.

The value of an SDR is determined by a basket of five major currencies—the U.S. dollar, euro, Chinese yuan, Japanese yen, and British pound. SDRs serve as a tool for the IMF to help stabilize the global economy by providing liquidity to its member nations when needed.

Answer 9

The primary function of money is to serve as a medium of exchange, facilitating trade.

Answer 10

The primary function of money is to serve as a medium of exchange, facilitating the process of trade and commerce. By acting as an intermediary, money eliminates the need for a barter system, where goods and services are directly exchanged for other goods and services. This makes transactions more efficient and practical.

Money allows individuals and businesses to buy and sell goods and services without the complexity of bartering. It provides a common measure of value, making it easier to compare the worth of different goods and services. As a medium of exchange, money also enables savings, investment, and the accumulation of wealth, thereby playing a key role in the economic development of societies.

In addition to being a medium of exchange, money also serves other important functions, such as acting as a store of value, a unit of account, and a standard of deferred payment, further enhancing its essential role in modern economies.

Answer 11

Pakistan’s economic slowdown is not caused by having a mixed economic system, but by factors like political instability and reliance on foreign aid.

Answer 12

Pakistan’s economic slowdown is not primarily caused by having a mixed economic system, but rather by a combination of other significant factors such as political instability and a heavy reliance on foreign aid. A mixed economic system, which combines elements of both market and government-controlled economies, does not inherently lead to economic challenges. In fact, many countries with mixed economies experience stable growth.

However, in Pakistan’s case, persistent political instability has hindered long-term economic planning and implementation of effective policies. Frequent changes in government, political unrest, and corruption have created an uncertain environment, making it difficult to attract investment and foster economic growth.

Additionally, Pakistan’s reliance on foreign aid has contributed to economic challenges. While foreign aid can provide temporary relief, over-dependence on external financial support can undermine the country’s ability to build a self-sustaining economy. This dependence can limit the government’s fiscal autonomy and restrict the development of key domestic industries.

Therefore, while a mixed economic system may not be the cause of Pakistan’s economic struggles, the combination of internal political issues and external economic dependencies have played a larger role in the country’s ongoing economic difficulties.