Indian Economy Quiz 3

RBI buys and sells government securities or bonds to control the money supply and interest rates. To increase the money supply, the RBI will purchase bonds from banks, which injects money into the banking system. It will sell bonds to reduce the money supply. Statutory Liquidity Ratio (SLR) is a minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold or other securities.

Goods and Services Tax (GST) is an indirect tax used in India on the supply of goods and services. It is a comprehensive, multistage, destination-based tax: comprehensive because it has subsumed almost all the indirect taxes except a few state taxes.

Special drawing rights (SDRs) are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund (IMF). SDRs are units of account for the IMF, and not a currency per se. They represent a claim to currency held by IMF member countries for which they may be exchanged.

Statutory Liquidity Ratio (SLR) is a minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold or other securities (or any bond). It is basically the reserve requirement that banks are expected to keep before offering credit to customers.

When the price of a commodity falls, we can expect the demand for it to increase. The law of demand states that the quantity purchased varies inversely with price.

Because higher interest rates mean higher borrowing costs, people will eventually start spending less. The demand for goods and services will then drop, which will cause inflation to fall. Thus, higher borrowing costs will increase production costs and decrease return on capital.

In economics, the demand for inferior goods decreases as income increases or the economy improves. When this happens, consumers will be more willing to spend on more costly substitutes. Some of the reasons behind this shift may include quality or a change to a consumer's socio-economic status.

The Finance Commissions are commissions periodically constituted by the President of India under Article 280 of the Indian Constitution to define the financial relations between the central government of India and the individual state governments.

An indirect tax is charged on producers of goods and services and is paid by the consumer indirectly. It is not directly levied on the income of a person. Instead, he/she has to pay the tax along with the price of goods or services bought by the seller. The person paying the tax to the government and the person bearing the liability to pay the tax are thus, two different people.

The Government of India (Ministry of Finance) has the sole right to mint coins. The responsibility for coinage vests with the Government of India in terms of the Coinage Act 1906. The Reserve Bank puts the coins into circulation on behalf of the Government of India.