Consider the following statements : 1. The Reserve Bank of India manages and services Government of India Securities but not any State Government Securities. 2. Treasury bills are issued by the Government of India and there are no treasury bills issued by the State Governments. 3. Treasury bills are issued at a discount from the par value. Which of the statements given above is/are correct ?
- A.1 and 2 only
- B.3 only
- C.2 and 3 only
- D.1, 2 and 3
Correct answer
Explanation
The correct answer is C, 2 and 3 only. Only the Centre issues treasury bills and they are sold at a discount, but the RBI also manages state government securities.
The RBI is the debt manager of the Government of India under Section 21 of the RBI Act, 1934, and it manages the borrowings of state governments under agreements made with them under Section 21A. States borrow from the market through State Development Loans, which the RBI auctions and services. Treasury bills are short-term money-market instruments of the Union government, issued in 91-day, 182-day and 364-day tenors. They carry no coupon: an investor buys them below face value and receives the full face value on maturity, and the difference is the return. States meet short gaps through ways and means advances instead.
A is wrong because statement 1 is false. B is wrong because statement 2 is also true. D is wrong because it includes the false statement 1.
Exam tip: T-bills: Centre only, zero coupon, 91/182/364 days; states borrow through SDLs.
Practice Questions
View allWhich one of the following forms of money supply is considered as the most widely used in the Indian monetary system?
- A.M1
- B.M2
- C.M3
- D.M4
Show answer
M3, called broad money, is the measure of money supply most commonly used by the RBI for analysis and policy.
Read the full explanation →Which one among the following pairs of type of firm and feature is not correctly matched ?
- A.Oligopoly firm : Interdependence in decision-making
- B.Monopolistic competitive firm : Firm is a price setter
- C.Monopoly firm : Produces an efficient level of output
- D.Perfectly competitive firm : Produces socially optimum output
Show answer
A monopolist restricts output and charges a higher price, so it does not produce the efficient level of output. A monopoly is a single seller of a product with no close substitutes and strong barriers to entry.
Read the full explanation →Which one of the following statements is not correct?
- A.When total utility is maximum, marginal utility is zero.
- B.When total utility is decreasing, marginal utility is negative.
- C.When total utility is increasing, marginal utility is positive.
- D.When total utility is maximum, marginal and average utility are equal to each other.
Show answer
At the point where total utility is highest, marginal utility is zero but average utility is still positive, so the two cannot be equal.
Read the full explanation →Which one of the following is not an objective of the MGNREGA?
- A.Providing up to 100 days of skilled labour in a financial year
- B.Creation of productive assets
- C.Enhancing livelihood security
- D.Ensuring empowerment to women
Show answer
The Act guarantees at least 100 days of unskilled manual work, not skilled labour.
Read the full explanation →Which one of the following is the opportunity cost of a chosen activity ?
- A.Out of pocket cost
- B.Out of pocket cost plus cost incurred by the Government
- C.Value of all opportunities forgone
- D.Value of next best alternative that is given up
Show answer
Opportunity cost is what you sacrifice by choosing one option, measured by the best option you did not take. Because resources such as time, money and land are scarce, choosing one use means giving up others.
Read the full explanation →