Topic Details (Notes format)

Money Market and Capital Market

Subject: Economics

Book: Comprehensive Indian Economy

India’s financial markets are split into the money market (short-term funds) and capital market (long-term). The money market includes instruments like Treasury Bills, Commercial Paper, and inter-bank lending. The capital market is governed by SEBI, featuring equity (stocks) and debt (bonds). Effective regulation ensures transparency, investor protection, and efficient fund mobilization for development. Students should grasp the significance of liquidity management, interest rate formation, and how capital market reforms (e.g., dematerialization, listing norms) boost investor confidence and corporate governance. Practice identifying differences, key instruments, and regulatory frameworks for robust exam-oriented preparation.

Practice Questions

What is “open market operations” (OMO)?

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Which is the largest source of tax revenue for the Government of India?

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What is the main purpose of monetary policy?

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Which of the following sectors contributes the most to India’s GDP?

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Which economic concept is described as “the next best alternative foregone”?

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What is the “law of diminishing marginal utility”?

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What is meant by “crowding out” in economics?

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Which of the following is a feature of monopolistic competition?

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What does the term “capital account” refer to in the balance of payments?

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What is the term for the price at which demand and supply in a market are equal?

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