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5-question demo · WBPSC Miscellaneous - PRELIMS - Indian Economy

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Question 1 of 5
In which year was the Reserve Bank of India established?
A 1935
B 1940
C 1947
D 1949
Why: The Reserve Bank of India was established in 1935 under the Reserve Bank of India Act, 1934. It was nationalized on January 1, 1949, but its establishment date is 1935. Option A is correct.
Question 2 of 5
Which of the following is a primary function of the Reserve Bank of India?
A Export finance
B Agriculture finance
C Collecting data and publication
D Retail banking services
Why: The RBI's primary functions include formulating and implementing monetary policy, regulating banking institutions, managing foreign exchange, issuing currency, and collecting data and publication for economic analysis. Collecting data and publication is a core function of the RBI. Export finance and agriculture finance are handled by specialized institutions like EXIM Bank and NABARD respectively. Option C is correct.
Question 3 of 5
RBI uses reverse repo to absorb liquidity. The statement is:
A True
B False
C Partly True
D Does not apply
Why: The statement is True. Reverse repo is a monetary policy instrument used by the RBI to absorb excess liquidity from the banking system. In a reverse repo operation, the RBI borrows funds from commercial banks by selling government securities with an agreement to repurchase them at a higher price. This reduces the money supply in the economy. Option A (True) is correct.
Question 4 of 5
Through open market operation, the RBI purchases and sells:
A Foreign exchange
B Gold
C Government securities
D All of the above
Why: Open Market Operations (OMO) refer to the purchase and sale of government securities by the RBI. Through OMO, the RBI influences the money supply and interest rates in the economy. When the RBI purchases government securities, it injects liquidity into the system; when it sells, it absorbs liquidity. While the RBI does manage foreign exchange and gold reserves, OMO specifically refers to trading in government securities. Option C is correct.
Question 5 of 5
Which of the following is a function of NABARD?
A Monitoring flow of ground level credit in agriculture
B Issuing currency notes
C Managing foreign exchange reserves
D Regulating stock markets
Why: NABARD (National Bank for Agriculture and Rural Development) is a specialized financial institution established to promote agricultural and rural development. One of its key functions is monitoring the flow of ground-level credit in agriculture to ensure that credit reaches farmers effectively. Issuing currency is the RBI's function, managing forex reserves is also an RBI function, and regulating stock markets is SEBI's responsibility. Option A is correct.