Indian Banking and Financial System Questions and Answers

Answer: D

Correct answer: 1 and 2

The first two describe inflationary channels. A guaranteed employment scheme puts purchasing power into rural households, raising demand for food and other goods faster than supply can respond. It also raises rural wages, both directly and by setting a floor that private employers must match - and higher wages feed into the cost of agricultural output.

The third works the other way. Increased production adds to supply and would ease prices, not raise them. So it cannot be part of an explanation of inflationary pressure, whatever its other merits, and only the first two statements answer the question asked.

Answer: A

Correct answer: prime costs

Prime cost is direct material plus direct labour plus direct expenses - the costs traceable to each unit produced, and therefore the costs that rise and fall with output.

Overheads are the indirect costs, and the greater part of them - rent, insurance, supervision, depreciation - is incurred whether or not anything is produced, so they behave as fixed costs in the short run. "Indirect costs" is simply another name for overheads and fails for the same reason. Since the first two options are not variable costs, "all of the above" cannot hold either.

Answer: D

Correct answer: All of the above

IDBI was created in 1964 as the apex development finance institution, and all three describe that apex role from a different side.

It co-ordinated, regulated and supervised the other institutions - IFCI, ICICI, UTI, LIC, the commercial banks and the SFCs. It supplemented their resources by refinance, widening the assistance they could give. And it undertook planning, promotion and development of key industries to diversify industrial growth. A body that merely lent would have had only the second of these; the first and third are what the word "apex" adds.

Answer: D

Correct answer: all of these

The balance of payments is a complete record of a country's transactions with the rest of the world, so it necessarily includes all three parts.

The current account covers goods, services, income and transfers; the capital and financial account covers transactions in assets and liabilities; and the official settlements or reserves account records the change in official reserve holdings that balances the whole. Taken together they must sum to zero, since every transaction is entered twice. Any option naming only one component describes a part of the accounts, not the balance of payments.

Answer: B

Correct answer: 1951-56

The First Five Year Plan covered 1951 to 1956. Based on the Harrod–Domar model, it gave priority to agriculture and irrigation, the sector most damaged by Partition and by the food shortages of the late 1940s.

It is generally counted a success, exceeding its growth target of 2.1 per cent with about 3.6 per cent achieved. The date fixes the whole sequence that follows, each Plan running five years from it: Second 1956–61, Third 1961–66, and so on. Planning began in 1951 rather than 1947 because the Planning Commission itself was constituted only in March 1950.

Answer: B

Correct answer: Reduce costs by 5 percent

An objective must be specific enough that attainment can be tested. "Reduce costs by 5 percent" states a measurable target against which performance can later be judged.

"Reduce costs as much as possible" and "make more profits" state directions rather than targets: no result could ever be shown to have failed them. "Reduce product prices to capture market" is a course of action - a strategy or policy - not the end it serves. The distinction matters because objectives are the standard against which control is exercised, and an unmeasurable standard controls nothing.

Answer: B

Correct answer: Mahila Samriddhi Yojna

Mahila Samriddhi Yojana, launched in 1993, promoted savings among rural women through accounts at the local post office, with the government adding an incentive on the amount held for a year.

The design used the post office deliberately: it reached villages where no bank branch existed, and the account stood in the woman's own name, giving her control over the balance. The Rashtriya Mahila Kosh, by contrast, supplies credit rather than encouraging savings, and Indira Mahila Yojana and Jawahar Rozgar Yojana concerned empowerment and rural employment respectively.

Answer: A

Correct answer: The money value of all final goods and services produced annually in the economy, less depreciation on capital

Net National Product is Gross National Product with depreciation taken out: \[ \text{NNP} = \text{GNP} - \text{depreciation}. \] The reasoning is that some of a year’s output merely replaces machinery, buildings and vehicles that wore out during that year. That part is not a genuine addition to national wealth, so subtracting it leaves what the country can consume without running its capital stock down - which is why NNP at factor cost is also called national income. Two features of the definition deserve care. It counts only final goods and services, so the value of intermediate inputs is not added again - the flour in a loaf is counted once, in the loaf. And it is national rather than domestic, so it covers output attributable to a country’s residents wherever they earn it, adding net factor income from abroad to the domestic figure. The remaining options each shrink the definition wrongly: two restrict it to tangible goods, dropping services altogether, and one does the reverse. The keyed option in this record omitted the deduction for depreciation, which is the whole of what makes the product net; its text has been corrected.

Answer: B

Correct answer: Marginal cost is above average cost

The relation follows from the arithmetic of averages. An average rises only when the next value added exceeds it, so if average cost is increasing the marginal cost must lie above it.

The same logic gives the whole picture: where average cost is falling, marginal cost lies below it, and the two are equal exactly at the minimum of the average cost curve. That is why the marginal cost curve always cuts the average cost curve at its lowest point - not as a special property of costs, but as a necessary feature of any average and its margin.

Answer: A

Correct answer: 2007 – 2012

The Eleventh Five Year Plan ran from 2007 to 2012, styled a plan for "faster and more inclusive growth", with a target of 9 per cent annual GDP growth.

The arithmetic is a useful check: Five Year Plans run in fixed five-year blocks from 1951, so the Tenth covered 2002–07 and the Twelfth 2012–17. The options offering 2005–10, 2006–11 and 2008–13 all break that sequence, which is enough to eliminate them without recalling the Eleventh Plan specifically. The Twelfth was the last; the system was discontinued when NITI Aayog replaced the Planning Commission.