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Money and Banking online Test - 27

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Money and Banking online Test - 27
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Weekly Quiz Competition
  • Question 1
    1 / -0
    We read in the newspaper that the foreign direct investment are preferred over the capital inflow. In this context, please consider the following.
      Which statement is more suitable for this statement ?
    Solution
    We read in the newspaper that the foreign direct investment are preferred over the capital inflow. In this context, FDI brings in latest technology is the more suitable for this statement. Foreign Direct Investment plays a crucial role in growth dynamics of an economy.It serves the interest of the foreign investors as well as look after the long-term financial interest of the investors.
  • Question 2
    1 / -0
    Central Bank's dealings are generally with ________.
    Solution
    Central bank is an apex bank that controls the entire banking system of a country. The parties with which the central bank deals as a part of its everyday function are the government, state banks and other financial institutions. These people, bank and institution have their deposits in the central bank and the central bank also lends them funds at the time of urgency. 
  • Question 3
    1 / -0
    According to Negotiable Act, $$1881$$, which of the following refers to a promissory note, bill of exchange or cheque payable either to order or to bearer?
    Solution
    According to Negotiable Act, 1881 a “negotiable instrument” means a promissory note, bill of exchange or cheque payable either to order or to bearer.
    A negotiable instrument may be made payable to two or more payees jointly, or it may be made payable in the alternative to one of two, or one or some of several payees.
  • Question 4
    1 / -0
    A person is considered the holder of Negotiable Instruments if _________.
    Solution
    According to the Negotiable Instruments Act, 1881,
    The “holder” of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto. Where the note, bill or cheque is lost or destroyed, its holder is the person so entitled at the time of such loss or destruction.
    An individual thus becomes the holder of the instrument if
    • his name appear on an instrument
    • he is possession of bearer instrument.
    • he is entitled to receive or recover the amount due on the instrument
  • Question 5
    1 / -0
    What functions are performed by money?
    Solution

    Money refers to a common medium of exchange that is issued under the law of government and acts as a legal tender for the whole country. The functions performed by money are as follows: 

    1. Medium of exchange: As a medium of exchange, it refers to a function of money in which money is considered as a mode of exchanging goods. This function of money solved the main problem of barter system which was double coincidence of wants.

    2. Common measure of value: As a measure of value, it refers to a function of money that helps in determining the value of goods and services. Money is taken as the common denominator while measuring the value of goods and services in monetary terms.

    3. Store of value: As a store of value, it refers to the function of money  that helps individuals in storing their wealth in the form of money. Therefore, money acts as an asset that sustains value over a period of time.


  • Question 6
    1 / -0
    The money market is a market for __________ funds which deals in monetary assets whose period of maturity is upto one year.
    Solution
    The money market is a market for short-term funds which deals in monetary assets whose period of maturity is up to one year. Generally money market is the source of finance for working capital. Transactions of money market include lending and borrowing of cash for a short period of time and also sale and purchase of securities having one year time.
  • Question 7
    1 / -0
    Which of the following is the main function of money according to modern economists ?
    Solution

    Money refers to a common medium of exchange that is issued under the law of government and acts as a legal tender for the whole country. The main function of money according to modern economics is money as a store of value. As a store of value, money functions by helping individuals to store their wealth in the form of money. Therefore, money acts as an asset that sustains value over a period of time because it is non-perishable and inexpensive form of storage. 

  • Question 8
    1 / -0
    Broadly speaking, a Central Bank has which of the following objectives?
    Solution
    A central bank is an apex institution that regulates and controls the entire banking system of a country. The main objectives of the central bank include: 
    1. Monetary stability: Central bank seeks to achieve monetary stability through its monetary policy which includes quantitative and qualitative measures that balance the value of money in the economy. 
    2. Price stability and issue of currency: Central bank through its various policies maintains the prices of goods and services in the economy and avoids inflation and deflation in the economy. They also have the monopoly rights to issue the currency of the country which acts as the legal tender in the economy. 
    3. Maintenance of international value of nation's currency: The central bank maintains a minimum reserve of international currency all the time in order to meet emergency requirements of foreign exchange and maintain the international value of the nation's currency by soaking and releasing these funds in the international market.
  • Question 9
    1 / -0
    The depository receipts denominated in US dollars are known as ______________.
    Solution
    The local currency shares of a company are delivered to the depository bank. The depository bank issues depository receipts against these shares. Such depository receipts denominated in US dollars are known as Global Depository Receipts.
  • Question 10
    1 / -0
    FCCB's are very similar to the _________ debentures issued in India.
    Solution
    Foreign currency convertible bonds are equity linked debt securities that are to be converted into equity or depository receipts after a specific period. Holder of FCCB's has the option of converting them into equity shares at a predetermined price or exchange rate. Hence, FCCB's are very similar to the convertible debentures issued in India.
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