Economy Set 1 MCQs

Economy GK

Economy Set 1 MCQs

Practice Economy GK MCQs on basic economic concepts including economy, economics, microeconomics, macroeconomics, goods and services, demand and supply, factors of production, opportunity cost, economic activities, sectors of economy and other fundamental concepts frequently asked in SSC, Railway, Banking, UPSC, JKSSB, JKPSC, Police, Defence and other competitive examinations.

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Page 64 of 111
Question #1261
The 'currency swap' between two central banks is:
A. purchase of gold
B. a loan of domestic currency against foreign currency with an agreement to reverse later
C. permanent exchange of currencies
D. import of goods
Discuss
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Correct Answer: Option B

Explanation:
A currency swap is a temporary exchange of currencies between central banks to provide liquidity.
This question belongs to: Economy GK Economy Set 1
Question #1262
The 'forward market' in foreign exchange deals with:
A. only spot transactions
B. delivery of currencies at a future date at a predetermined rate
C. immediate delivery of currencies
D. only government transactions
Discuss
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Correct Answer: Option B

Explanation:
The forward market deals with contracts for future delivery of currencies at predetermined rates.
This question belongs to: Economy GK Economy Set 1
Question #1263
The 'spot market' in foreign exchange deals with:
A. future delivery of currencies
B. options only
C. futures only
D. immediate delivery of currencies
Discuss
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Correct Answer: Option D

Explanation:
Spot foreign exchange transactions involve immediate delivery of currencies.
This question belongs to: Economy GK Economy Set 1
Question #1264
The 'currency futures' are standardized contracts to exchange currencies at a future date and are traded on:
A. RBI only
B. over-the-counter only
C. commercial banks only
D. stock exchanges
Discuss
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Correct Answer: Option D

Explanation:
Currency futures are exchange-traded standardized contracts.
This question belongs to: Economy GK Economy Set 1
Question #1265
The 'managed float' exchange rate system means the exchange rate is:
A. completely fixed
B. not applicable
C. set by the IMF
D. determined by market forces with possible central bank intervention
Discuss
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Correct Answer: Option D

Explanation:
Managed float allows market determination with occasional central bank intervention.
This question belongs to: Economy GK Economy Set 1
Question #1266
The 'fixed exchange rate system' requires the central bank to:
A. let the exchange rate move freely
B. abolish foreign exchange reserves
C. float the currency
D. intervene to maintain the rate within a narrow band
Discuss
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Correct Answer: Option D

Explanation:
Under a fixed exchange rate, the central bank intervenes to maintain the currency value.
This question belongs to: Economy GK Economy Set 1
Question #1267
The 'currency board' system is a form of:
A. managed float
B. free float
C. floating exchange rate
D. fixed exchange rate with full backing of domestic currency by foreign reserves
Discuss
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Correct Answer: Option D

Explanation:
A currency board pegs the domestic currency to a foreign currency with full reserve backing.
This question belongs to: Economy GK Economy Set 1
Question #1268
The 'dollarization' of an economy means:
A. exporting to the US only
B. buying US bonds
C. pegging to the dollar
D. adopting the US dollar as the official currency
Discuss
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Correct Answer: Option D

Explanation:
Dollarization occurs when a country adopts the US dollar as its official currency.
This question belongs to: Economy GK Economy Set 1
Question #1269
The 'optimal currency area' theory was developed by:
A. Milton Friedman
B. Paul Krugman
C. John Maynard Keynes
D. Robert Mundell
Discuss
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Correct Answer: Option D

Explanation:
Robert Mundell developed the theory of optimal currency areas.
This question belongs to: Economy GK Economy Set 1
Question #1270
The 'euro' currency was introduced as an accounting currency in which year?
A. 1999
B. 1992
C. 2005
D. 2002
Discuss
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Correct Answer: Option A

Explanation:
The euro was introduced in bookkeeping form in 1999, with physical notes and coins in 2002.
This question belongs to: Economy GK Economy Set 1
Question #1271
The 'European Central Bank' is headquartered in:
A. Brussels
B. Frankfurt
C. Berlin
D. Paris
Discuss
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Correct Answer: Option B

Explanation:
The European Central Bank is headquartered in Frankfurt, Germany.
This question belongs to: Economy GK Economy Set 1
Question #1272
The 'Federal Reserve System' is the central bank of:
A. Germany
B. United States
C. United Kingdom
D. Japan
Discuss
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Correct Answer: Option B

Explanation:
The Federal Reserve System is the central bank of the United States.
This question belongs to: Economy GK Economy Set 1
Question #1273
The 'Bank of England' is the central bank of:
A. Canada
B. Germany
C. United Kingdom
D. France
Discuss
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Correct Answer: Option C

Explanation:
The Bank of England is the central bank of the United Kingdom.
This question belongs to: Economy GK Economy Set 1
Question #1274
The 'Bank of Japan' is the central bank of:
A. South Korea
B. Japan
C. China
D. Taiwan
Discuss
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Correct Answer: Option B

Explanation:
The Bank of Japan is the central bank of Japan.
This question belongs to: Economy GK Economy Set 1
Question #1275
The 'People's Bank of China' is the central bank of:
A. China
B. India
C. Vietnam
D. Japan
Discuss
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Correct Answer: Option A

Explanation:
The People's Bank of China is China's central bank.
This question belongs to: Economy GK Economy Set 1
Question #1276
The 'Reserve Bank of India' was modelled on which central bank?
A. European Central Bank
B. Federal Reserve System
C. Bank of England
D. Bank of Japan
Discuss
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Correct Answer: Option C

Explanation:
The RBI was modelled on the Bank of England.
This question belongs to: Economy GK Economy Set 1
Question #1277
The 'monetary policy framework' in India legally mandates RBI to target:
A. exchange rate
B. fiscal deficit
C. GDP growth
D. consumer price inflation
Discuss
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Correct Answer: Option D

Explanation:
The RBI's monetary policy framework targets consumer price inflation.
This question belongs to: Economy GK Economy Set 1
Question #1278
The 'inflation targeting' in India uses which index as the nominal anchor?
A. WPI
B. CPI-Combined
C. CPI-IW only
D. GDP deflator
Discuss
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Correct Answer: Option B

Explanation:
RBI's inflation targeting uses CPI-Combined as the nominal anchor.
This question belongs to: Economy GK Economy Set 1
Question #1279
The 'Monetary Policy Committee' consists of how many members?
A. 10
B. 6
C. 4
D. 8
Discuss
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Correct Answer: Option B

Explanation:
The Monetary Policy Committee has six members, including the RBI Governor.
This question belongs to: Economy GK Economy Set 1
Question #1280
The 'Monetary Policy Committee' was constituted under which act?
A. Negotiable Instruments Act, 1881
B. Companies Act, 2013
C. RBI Act, 1934
D. Banking Regulation Act, 1949
Discuss
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Correct Answer: Option C

Explanation:
The MPC was constituted under the Reserve Bank of India Act, 1934 as amended.
This question belongs to: Economy GK Economy Set 1
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