INDIAN BANKING RADAR (IBR) - JAIIB MODEL PAPER — PREMIUM PRACTICE SERIES

VOL. 1 | INDIAN ECONOMY & INDIAN FINANCIAL SYSTEM (IE & IFS)

IBR KNOWLEDGE HUB | JAIIB EXAMINATION PREPARATION

🎯 TARGET: JAIIB Aspirants • Bank Employees • Banking Professionals • Faculty Members

📝 20 MCQs | ⏱️ Suggested Time: 25 Minutes | 🎓 Difficulty: Exam Standard

Intelligence for Bankers. Insight for Decision-Makers.

📘 MODEL TEST — INDIAN ECONOMY & INDIAN FINANCIAL SYSTEM

Instructions

Attempt all 20 questions.

Select the single best answer from options A–E.

Each question carries equal weight in this practice test.

Check the answer key only after attempting all questions.

This is an original IBR practice paper, not an official IIBF question paper or a collection of previous-year questions.

Q1. Which of the following best describes the difference between nominal GDP and real GDP:

A. Nominal GDP is measured at current prices, whereas real GDP is adjusted for price changes using constant prices.

B. Nominal GDP excludes services, whereas real GDP includes services.

C. Nominal GDP measures only agricultural output, whereas real GDP measures industrial output.

D. Nominal GDP excludes government expenditure, whereas real GDP includes it.

E. Nominal GDP is always lower than real GDP.

Q2. An economy experiences a sustained increase in the general price level primarily because aggregate demand grows faster than the economy's productive capacity. This situation is known as:

A. Cost-push deflation

B. Demand-pull inflation

C. Structural unemployment

D. Disinflation

E. Stagflation caused exclusively by falling demand

Q3. The fiscal deficit of the Central Government is generally calculated as total expenditure minus:

A. Total tax revenue only

B. Total revenue receipts only

C. Revenue receipts and non-debt capital receipts

D. Tax revenue and interest payments

E. Borrowings and interest receipts

Q4. If the Reserve Bank of India raises the policy repo rate, the immediate intended transmission mechanism, all else being equal, is generally to:

A. Increase the money supply and stimulate credit demand.

B. Reduce the cost of borrowing for all borrowers.

C. Eliminate the Government's fiscal deficit.

D. Increase borrowing costs and moderate aggregate demand and inflationary pressures.

E. Guarantee an immediate appreciation of the Indian rupee.

Q5. Assuming other factors remain unchanged, an increase in consumer income will generally increase the demand for a normal good. This is represented by:

A. A movement along the same demand curve caused by a change in the good's price.

B. A leftward shift of the demand curve in every circumstance.

C. A movement along the supply curve.

D. A contraction in quantity demanded.

E. A rightward shift of the demand curve.

Q6. The GDP deflator is generally calculated as:

A. (Nominal GDP ÷ Real GDP) × 100

B. (Real GDP ÷ Nominal GDP) × 100

C. (Consumer expenditure ÷ Government expenditure) × 100

D. (Exports ÷ Imports) × 100

E. (Fiscal deficit ÷ GDP) × 100

Q7. Which of the following is ordinarily recorded in the current account of India's Balance of Payments:

A. Foreign direct investment inflows

B. Exports and imports of goods and services, primary income and secondary income

C. External commercial borrowings received by Indian companies

D. Foreign portfolio investment in Indian equities

E. Changes in banks' external financial assets alone

Q8. Under India's monetary policy framework, the Monetary Policy Committee (MPC) is responsible for:

A. Determining the Union Government's annual expenditure.

B. Regulating all insurance companies.

C. Deciding the policy repo rate required to achieve the inflation target, while keeping the growth objective in mind.

D. Fixing the prices of all essential commodities.

E. Approving the annual budgets of commercial banks.

Q9. Which institution is primarily responsible for regulating India's securities market and protecting the interests of securities investors:

A. NABARD

B. IRDAI

C. PFRDA

D. Securities and Exchange Board of India (SEBI)

E. Deposit Insurance and Credit Guarantee Corporation (DICGC)

Q10. Which institution plays a major role in providing and supporting refinance and development finance for agriculture and rural development in India:

A. EXIM Bank

B. National Housing Bank

C. Securities and Exchange Board of India

D. Pension Fund Regulatory and Development Authority

E. National Bank for Agriculture and Rural Development (NABARD)

Q11. In the Indian money market, call money generally refers to:

A. Unsecured funds borrowed or lent on an overnight basis among eligible market participants.

B. Long-term funds raised through equity shares.

C. Secured loans granted exclusively for periods exceeding five years.

D. Government securities with a maturity of ten years.

E. Foreign currency deposits maintained by non-residents.

Q12. Treasury Bills issued by the Government of India are generally:

A. Perpetual securities carrying variable dividends.

B. Short-term government securities issued at a discount and redeemed at face value.

C. Equity instruments issued by public sector banks.

D. Long-term corporate bonds carrying fixed coupons.

E. Unsecured loans issued by private companies.

Q13. The Cash Reserve Ratio (CRR) requires scheduled banks to maintain a prescribed proportion of their applicable Net Demand and Time Liabilities as:

A. Cash in their own vaults only.

B. Government securities held in their investment portfolio.

C. Cash balances with the Reserve Bank of India.

D. Loans to priority-sector borrowers.

E. Deposits with insurance companies.

Q14. Which regulatory institution is responsible for regulating and developing India's insurance sector:

A. SEBI

B. NABARD

C. PFRDA

D. Insurance Regulatory and Development Authority of India (IRDAI)

E. National Payments Corporation of India (NPCI)

Q15. A company sells its trade receivables to a specialised financial institution to obtain immediate funds and transfer or manage collection responsibilities under the agreed terms. This arrangement is known as:

A. Underwriting

B. Securitisation of government expenditure

C. Open market operations

D. Capital budgeting

E. Factoring

Q16. Commercial Paper (CP) is best described as:

A. An unsecured short-term money-market instrument issued by eligible entities, subject to applicable regulations.

B. A long-term secured mortgage loan issued by the Government.

C. An equity share carrying voting rights.

D. A perpetual deposit instrument issued exclusively by the RBI.

E. A negotiable instrument that can be issued only by individuals.

Q17. The Net Asset Value (NAV) per unit of an open-ended mutual fund is generally calculated as:

A. Total liabilities divided by the number of investors.

B. (Total assets minus total liabilities) divided by the number of outstanding units.

C. Total investment income divided by the number of fund managers.

D. Face value multiplied by the number of outstanding units.

E. Total expenses divided by the number of transactions.

Q18. In a standard repurchase agreement (repo), the borrower of funds generally:

A. Issues new equity shares to the lender.

B. Receives an unsecured grant from the RBI.

C. Sells securities and agrees to repurchase them at a specified future date and price.

D. Transfers ownership of securities permanently without a repurchase obligation.

E. Borrows funds without any contractual settlement obligation.

Q19. Which statement best distinguishes Foreign Direct Investment (FDI) from Foreign Portfolio Investment (FPI):

A. FDI is always short-term, while FPI is always permanent.

B. FDI can be made only in government securities.

C. FPI is prohibited in Indian financial markets.

D. FDI generally involves a lasting interest and a degree of influence in an enterprise, whereas FPI generally involves investment in financial assets without the same degree of management influence.

E. FDI and FPI are identical terms for all regulatory and statistical purposes.

Q20. Which of the following is a principal function of the International Monetary Fund (IMF):

A. Regulating every country's domestic stock exchange.

B. Issuing currency for all member countries.

C. Providing deposit insurance to commercial banks worldwide.

D. Financing every infrastructure project undertaken by member countries.

E. Promoting international monetary cooperation and providing financial assistance to member countries facing balance-of-payments difficulties, subject to applicable arrangements.

✅ ANSWER KEY

Q1.A

Q2.B

Q3.C

Q4.D

Q5.E

Q6.A

Q7.B

Q8.C

Q9.D

Q10.E

Q11.A

Q12.B

Q13.C

Q14.D

Q15.E

Q16.A

Q17.B

Q18.C

Q19.D

Q20.E

📚 QUICK REVISION CAPSULE

1. Nominal GDP vs Real GDP

Nominal GDP: Values output at current-period prices.

Real GDP: Measures output using constant prices to account for price changes.

2. Fiscal Deficit

Fiscal Deficit = Total Expenditure − Revenue Receipts − Non-Debt Capital Receipts.

It represents the Government's overall borrowing requirement before considering financing adjustments.

3. Monetary Policy

Repo rate: Policy rate associated with RBI lending to eligible banks against eligible collateral under the applicable framework.

CRR: Prescribed cash reserves maintained with the RBI.

Monetary Policy Committee: Determines the policy repo rate within India's inflation-targeting framework.

4. Balance of Payments

Current account: Goods, services, primary income and secondary income.

Financial account: Transactions involving financial assets and liabilities, including FDI and portfolio investment.

5. Indian Financial Regulators

RBI: Banking regulation, monetary policy and payment-system oversight under applicable laws.

SEBI: Securities market.

IRDAI: Insurance sector.

PFRDA: Pension sector.

NABARD: Agriculture and rural development finance and development functions.

6. Money Market Instruments

Call money: Overnight borrowing and lending among eligible participants.

Treasury Bills: Short-term Government securities.

Commercial Paper: Unsecured short-term money-market instrument.

Repo: Sale of securities with an agreement to repurchase them.

7. Financial Products

Factoring: Financing and management of receivables under an agreed arrangement.

Mutual Fund NAV: Net assets divided by outstanding units.

FDI: Investment involving a lasting interest and a degree of influence in an enterprise.

FPI: Portfolio investment in financial assets.

🎯 SELF-ASSESSMENT

Score

Performance indicator

18–20

Excellent — revise finer concepts

15–17

Very good — strengthen weak areas

11–14

Good start — revisit key concepts

0–10

Rebuild fundamentals and practise again

This is an informal IBR practice guide, not an official IIBF grading scale.

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DISCLAIMER: This is an original educational practice paper created for Indian Banking Radar. It is not an official IIBF examination paper or a set of previous-year questions. Candidates should refer to the latest IIBF syllabus, prescribed study material and applicable regulatory directions for examination preparation.