BANKING RELATED ECONOMICS QUIZ -5

81. Q. What is Cash Reserve Ratio
All commercial banks are required to keep a certain amount of its deposits in cash with RBI. This percentage is called the cash reserve ratio. The current CRR requirement is 6 per cent.(24th August 2011)
82. Q. What is Inflation
Inflation refers to a persistent rise in prices. Simply put, it is a situation of too much money and too few goods. Thus, due to scarcity of goods and the presence of many buyers, the prices are pushed up.
The converse of inflation, that is, deflation, is the persistent falling of prices. RBI can reduce the supply of money or increase interest rates to reduce inflation.
83. Q. Define Money Supply (M3)
This refers to the total volume of money circulating in the economy, and conventionally comprises currency with the public and demand deposits (current account + savings account) with the public.
The RBI has adopted four concepts of measuring money supply. The first one is M1, which equals the sum of currency with the public, demand deposits with the public and other deposits with the public. Simply put M1 includes all coins and notes in circulation, and personal current accounts.
The second, M2, is a measure of money, supply, including M1, plus personal deposit accounts - plus government deposits and deposits in currencies other than rupee.
The third concept M3 or the broad money concept, as it is also known, is quite popular. M3 includes net time deposits (fixed deposits), savings deposits with post office saving banks and all the components of M1.
84. Q. What is Statutory Liquidity Ratio
Banks in India are required to maintain 24 per cent of their demand and time liabilities in government securities and certain approved securities.(5.3.2009)
These are collectively known as SLR securities. The buying and selling of these securities laid the foundations of the 1992 Harshad Mehta scam.
85. Q. What is Repo rate?
A repurchase agreement or ready forward deal is a secured short-term (usually 15 days) loan by one bank to another against government securities.
Legally, the borrower sells the securities to the lending bank for cash, with the stipulation that at the end of the borrowing term, it will buy back the securities at a slightly higher price, the difference in price representing the interest. As on 24.8.2011 (8%)
86. Q. What is meant by Open Market Operations
An important instrument of credit control, the Reserve Bank of India purchases and sells securities in open market operations.
In times of inflation, RBI sells securities to mop up the excess money in the market. Similarly, to increase the supply of money, RBI purchases securities.
87. Q. What is meant by Economic growth?
Economic Growth: It is defined as long term increase in production potential of the economy. It is a quantitative concept.

88. Q. What is meant by Economic development?
Economic Development: It refers to the economic growth with structural changes in favour of non-agricultural activities. It is a qualitative concept.

89. Q. What is meant by sustainable development?
Sustainable Development: It is that development which takes care of the needs of the present generation without compromising the needs of the future generations. It also emphasizes on a clean environment.

90. Q. What is meant by Human Development Index? What is India’s ranking in HDI?
Ans. Human Development Index: It was introduced in 1990 by United Nations Development Programme (UNDP). It is defined as average of social components, namely, life expectancy at birth, education attainment and standard of living.

To define the human development level of a country, this index has been divided on a scale of 1.

High human development = HDI value is greater than 0.8.

Medium human development = HDI value is between 0.5 and 0.8.

Low human development = HDI value is below 0.5.

Its rank is 128 out of 177 nations, with a HDI value of 0.619.(2007/08)

91. Q. What is the First Five Year Plan period?

Ans. 1951-56—focus on agriculture/

92. Q. What is the Tenth five year plan period?

Ans. 2002-2007.-focus Science and technology.

93. Q. What is the Eleventh five year plan period?
Ans. 2007-2012.

94. When was Mumbai Stock Exchange set up?
Ans. 1875.

95. When was Ahmedabad stock Exchange set up?
Ans.1894.

96. Name the authority governing/monitoring the functions of stock exchanges?
Ans. Securities & Exchange Board of India.



97. Name the authority governing/monitoring the functions of insurance companies?
Ans. Insurance Regulatory Development Authority.

98. Where the headquarters of IRDA?
Ans. Hyderabad, A.P.

97. When was the Investment Commission set up in our country?

Ans. 2004.

100. According to Eleventh Plan, it is targeted to reduce dropout rates of children from elementary school from 52.2% in 2003-04 to ----- % by 2011-12.
Ans. 20%
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