PRELIMS मतलब MAD

Answer: C

Explanation:

Hedging is a risk-management technique used to reduce the impact of adverse price movements. It involves taking a position in one financial instrument that offsets the potential loss arising from another investment or exposure.

It can be understood as a form of financial protection similar to insurance.

Leveraging involves using borrowed funds to increase potential returns. However, it may also magnify losses.

Securitisation refers to pooling financial assets, such as loans or mortgages, and converting them into marketable securities.

Derivation is not the appropriate term for a risk-reduction strategy.

Theme: Capital Market

Answer: D

Explanation:

Masala Bonds are rupee-denominated bonds issued outside India by Indian entities. Although funds are raised from foreign investors, the bonds are denominated in Indian rupees.

As a result, the foreign investor generally bears the risk arising from fluctuations in the value of the rupee.

The issuance of such bonds is regulated primarily under the framework prescribed by the Reserve Bank of India. Their listing and trading may also be subject to applicable securities-market regulations.

Theme: External Sector and Financial Instruments

Answer: C

Explanation:

Statement 1 is correct. Nominal GDP is calculated using the prices prevailing during the year in which production takes place. Therefore, an increase in nominal GDP may result from an increase in output, an increase in prices, or both.

Statement 2 is also correct. Real GDP is calculated using constant or base-year prices. It removes the effect of inflation and therefore reflects changes in the actual volume of goods and services produced.

Real GDP is considered a more reliable indicator for comparing economic growth across different years.

Theme: National Income Accounting

Answer: B

Explanation:

Anchor investors are qualified institutional buyers that are allotted shares in an Initial Public Offering before the issue opens to the general public.

They usually invest a substantial amount, helping establish investor confidence and signalling institutional interest in the public issue.

Anchor investors may include mutual funds, insurance companies, pension funds, sovereign wealth funds and other major institutional investors. Their investment is subject to a prescribed lock-in period.

Investors who finance early-stage start-ups are generally known as angel investors or venture capitalists. Investors who spread funds across multiple assets follow a diversification strategy.

Theme: Stock Market and IPO Terminology

Answer: D

Explanation:

Broad money includes currency held by the public and different categories of deposits and financial liabilities of the banking system.

In India, M1 and M2 are generally treated as narrow measures of money supply, while M3 and M4 represent broader measures.

M3 includes:

• Currency with the public
• Demand deposits with banks
• Time deposits with banks
• Other deposits with the Reserve Bank of India

M4 includes M3 along with all deposits with the Post Office Savings Organisation, except National Savings Certificates.

Certificates of deposit issued by banks are also incorporated into the relevant banking-system liabilities while compiling broader monetary aggregates.

Therefore, all four components mentioned in the question form part of broad money.

Theme: Money Supply