Daily Quiz: UPSC Prelims Marathon – June 19, 2018

It is the ratio of Deposits which banks have to keep with RBI. Under CRR a certain percentage of the total bank deposits has to be kept in the current account with RBI. Banks don’t earn anything on that.

Banks will not have access to this amount. They cannot use this money for any of their economic or commercial activities. Banks can’t lend this portion of money to corporate or individual borrowers. With increase in CRR the lending capacity of banks will decrease as they will have less money.

The amount of money supply in the economy impacts prices i.e. when money supply increases inflation increases and when money supply decreases inflation decreases.

Money supply impacts GDP also, as more money is required to increase the output. When the demand for money increases, rate of interest goes up in the economy. So, when money supply increases then rate of interest may cool/decrease in the economy and vice versa.

Key Provisions of FRDI bill: It seeks to establish a Resolution Corporation to replace the existing Deposit Insurance and Credit Guarantee Corporation(DICGC) Resolution Corporation will monitor the financial firms such as banks and insurance companies, anticipate their risk of failure, take corrective action, and resolve them in case of such failure. The Corporation will also provide deposit insurance up to a certain limit, in case of bank failure.

In national income, all new goods and services produced are included. So, expenditure on purchase of an old house is not included. Brokerage on sale of shares is income of the agent for his services and it is included. Meals given to the beggars in not included because it is expenditure without any productive return. Commission on the sale on second hand car is again the income of the agent for his services and it will be included.

Frictional unemployment is unemployment that occurs from the inevitable time delays in finding new employment in a free market. It may also be called ‘search unemployment as it relates to the time taken to search for new employment. For example, if you graduate from university, you can’t necessarily expect to find a job straight away which matches your skills. This period of searching for a job is known as frictional unemployment. Frictional unemployment will also occur when people are switching between jobs, either because they have been made redundant or are looking for new employment.

If the real exchange rate is equal to one, currencies are at purchasing power parity.This means that goods cost the same in two countries when measured in the same currency. If the real exchange rises above one, this means that goods abroad have become more expensive than goods at home. The real exchange rate is often taken as a measure of a country’s international competitiveness

National Pharmaceutical Pricing Authority [NPPA] is an independent body under Department of Pharmaceuticals under Ministry of Chemicals and Fertilizers. Its functions are to fix/revise the controlled bulk drugs prices and formulations. National List of Essential Medicines contains 376 medicines. Criteria for inclusion into this list includes public health emergency, cost effective medicine etc. Once a drug or medical device is included in NLEM, its price can be capped by NPPA. Recently, NPPA capped the prices of knee implants. Surgical procedures are not covered under this.