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
31
What is the 'Real Interest Rate'?
Answer:
The nominal interest rate minus the inflation rate
The Real Interest Rate is the actual return on savings or the actual cost of borrowing after accounting for inflation. For example, if the bank interest rate is 20% and inflation is 15%, the real interest rate is 5%. If inflation is higher than the interest rate, the real rate becomes negative.
32
What is 'Financial Inclusion' in the context of SBP's strategic goals?
Answer:
Providing access to formal financial services for the unbanked population
Financial Inclusion refers to ensuring that all individuals and businesses have access to useful and affordable financial products (like bank accounts, insurance, and credit). SBP targets the unbanked population, especially women and small farmers, through digital tools to bring them into the formal economy.
33
What is the standard term of office for the Governor of the State Bank of Pakistan?
Answer:
5 years
The Governor of the SBP is appointed for a term of five years and is eligible for re-appointment for one additional five-year term. This long tenure is intended to provide stability and continuity in monetary policy, insulating the head of the central bank from short-term political cycles.
34
According to the SBP Act amendments of 2022, the government is prohibited from:
Answer:
Borrowing directly from the State Bank
A major reform in the 2022 SBP Act was the prohibition of direct government borrowing from the State Bank (often called 'printing money'). This was intended to curb inflationary financing of the budget deficit and force the government to borrow from commercial markets at market-competitive rates.
35
What is the 'KIBOR' rate, and who determines it?
Answer:
The Karachi Interbank Offered Rate, determined by commercial banks
KIBOR stands for Karachi Interbank Offered Rate. It is the average interest rate at which commercial banks lend to one each other in the wholesale money market. It serves as a benchmark for most commercial and industrial loans in Pakistan.
36
Who is the ex-officio Chairman of the Board of Directors of the State Bank of Pakistan?
Answer:
The Governor of the State Bank
The Governor of the State Bank of Pakistan serves as the Chairman of the Board of Directors. The board is responsible for the general superintendence and direction of the affairs of the bank, ensuring that it operates within the legal framework established by the SBP Act.
37
What does 'Open Market Operations' (OMO) refer to in SBP's daily activity?
Answer:
Buying or selling government securities to manage market liquidity
OMOs are the SBP's primary tool for managing liquidity in the banking system. If there is a shortage of cash (liquidity), the SBP injects money by buying securities (Repo). If there is excess cash, the SBP mops it up by selling securities (Reverse Repo) to ensure market rates stay close to the Policy Rate.
38
Which of the following is NOT a function of the State Bank of Pakistan?
Answer:
Preparation of the Federal Budget
Preparing the Federal Budget is the responsibility of the Ministry of Finance and the federal government, not the State Bank. The SBP's roles are confined to monetary policy, currency issuance, banking supervision, and acting as the banker to the government.
39
What is the 'SLR' that commercial banks must maintain in Pakistan?
Answer:
Statutory Liquidity Requirement
The Statutory Liquidity Requirement (SLR) is the proportion of deposits that banks must maintain in the form of liquid assets like gold or government securities (T-bills and PIBs). This ensures that banks remain liquid and can meet their obligations, while also providing a market for government debt.
40
What is 'CRR' in the context of SBP's monetary tools?
Answer:
Cash Reserve Requirement
The Cash Reserve Requirement (CRR) is the percentage of total deposits that commercial banks must keep with the SBP in the form of cash. By increasing the CRR, the SBP can reduce the amount of money banks have available to lend, thereby tightening the money supply and controlling inflation.