Pakistan Studies/Affairs MCQs
Topic Notes: Pakistan Studies/Affairs
MCQs and preparation resources for competitive exams, covering important concepts, past papers, and detailed explanations.
Plato
- Biography: Ancient Greek philosopher (427–347 BCE), student of Socrates and teacher of Aristotle, founder of the Academy in Athens.
- Important Ideas:
- Theory of Forms
- Philosopher-King
- Ideal State
1
What is 'Velocity of Money'?
Answer:
The number of times a unit of currency changes hands in a given period
Velocity of money is an economic concept that measures how fast money moves through the economy. If people spend money quickly, velocity is high, which can increase the total GDP. SBP monitors this because high velocity with a high money supply can lead to rapid inflation.
2
Which SBP department manages the 'Foreign Exchange' market and issues circulars for importers and exporters?
Answer:
Exchange Policy Department
The Exchange Policy Department (EPD) is responsible for formulating and implementing policies related to foreign exchange. It issues the 'Foreign Exchange Manual' and circulars that regulate how much foreign currency can be taken out of the country and the rules for international trade payments.
3
What is the 'Governor's Annual Report'?
Answer:
A public document reviewing the state of the economy and SBP operations
Under the SBP Act, the Governor is required to submit an annual report to the Parliament and the public. This report provides a detailed analysis of the country's economic performance, the effectiveness of monetary policy, and the challenges facing the financial sector.
4
Which international agreement set the standards for 'Capital Adequacy' that the SBP follows?
Answer:
The Basel Accords (Basel II and III)
The Basel Accords are a set of international banking regulations issued by the Basel Committee on Banking Supervision. SBP has implemented these standards to ensure that Pakistani banks have enough capital to handle risks, bringing the local banking sector in line with global best practices.
5
What is the 'Export Refinance Scheme' (ERF) of the SBP?
Answer:
A facility providing low-cost financing to exporters to boost trade
The ERF is a concessional financing scheme. The SBP provides funds to commercial banks at very low rates, which the banks then lend to exporters. This reduces the cost of doing business for exporters, making Pakistani products more competitive in the international market.
6
What is 'Raast ID'?
Answer:
A simple identifier like a mobile number linked to a bank account for easy payments
Raast ID allows users to link their bank accounts to their mobile phone numbers. This eliminates the need for long and complex IBAN numbers, allowing people to receive money instantly just by sharing their mobile number with the sender.
7
What is 'Negative Real Interest Rate' and its effect on savers?
Answer:
When inflation is higher than nominal interest rate; savers lose purchasing power
A negative real interest rate occurs when inflation is higher than the interest rate given by the bank. In this scenario, even though your bank balance might be increasing, its actual purchasing power is decreasing, which discourages savings and encourages consumption or investment in assets like gold.
8
Which of the following describes 'Financial Stability' as a goal of the SBP?
Answer:
Ensuring the resilience of the banking system against shocks
Financial stability means that the banking and payment systems are working smoothly and can withstand economic crises without collapsing. SBP monitors 'Systemic Risk' to ensure that if one bank fails, it doesn't cause a chain reaction that destroys the whole economy.
9
What is 'Reverse Repo' in SBP operations?
Answer:
When the SBP sells securities to mop up excess liquidity
In a 'Reverse Repo' operation, the SBP sells government securities to commercial banks with an agreement to buy them back later. This action removes (mops up) excess cash from the banking system, helping to push up market interest rates.
10
What is the 'SBP Floor Rate'?
Answer:
The rate at which the SBP accepts excess deposits from banks
The Floor Rate is part of the Interest Rate Corridor. When banks have excess cash and cannot lend it to anyone else, they can deposit it at the SBP and earn the Floor Rate. This ensures that market interest rates never fall below a certain point.