Indian Economy MCQs
Indian Economy Multiple Choice Questions (MCQs) for SSC, State and all One Day Examinations of India. Objective Questions on Indian Economy for competitive examinations.
1. Agricultural Income Tax revenue goes to which of the following governments in India?
[A] State Governments
[B] Central Government
[C] Collected by State Governments , delivered to Central Government
[D] Collected by Central Government, delivered to State Governments
Show Answer
Correct Answer: A [State Governments]
Notes:
The taxing powers of the central government encompass taxes on income (except agricultural income), excise on goods produced (other than alcohol), customs duties, and inter-state sale of goods.
The state governments are vested with the power to tax agricultural income, land and buildings, sale of goods (other than inter-state), and excise on alcohol. Local authorities such as Panchayat and Municipality also have power to levy some minor taxes.
2. Where do banks keep liquid assets for Statutory Liquidity Ratio (SLR)?
[A] With themselves
[B] With the RBI
[C] With other banks
[D] In the market
Show Answer
Correct Answer: A [With themselves]
Notes:
Under the Statutory Liquidity Ratio (SLR), banks must maintain liquid assets such as cash, gold, or approved securities with themselves. SLR is mandated by the Reserve Bank of India under the Banking Regulation Act, 1949. The current SLR requirement is 18% of Net Demand and Time Liabilities (NDTL) as per RBI policy. These assets are not kept with the RBI.
3. Who among the following scholars is associated with Law of Rent?
[A] Richard Jones
[B] Thomas Robert Malthus
[C] David Ricardo
[D] Adam Smith
Show Answer
Correct Answer: C [David Ricardo]
Notes:
David Ricardo, an English classical economist, developed the law of rent in 1809. He presented the law in his book On the Principles of Political Economy and Taxation in 1821.
Ricardo’s theory defined rent as the portion of the earth’s produce that is paid to the landlord for the original and indestructible powers of the soil. In other words, rent is the price paid for the use of land.
Ricardo developed his theory to explain the origin and nature of economic rent. He used the economy and rent to analyze the large rise in corn and land prices during the Napoleonic wars (1805-1815).
The term “Ricardian rent” comes from Ricardo’s theory.
4. Which statement defines a balanced budget?
[A] Total expenditure exceeds total revenue
[B] Total revenue equals total expenditure
[C] Total revenue exceeds total expenditure
[D] Total revenue equals or exceeds expenditure
Show Answer
Correct Answer: B [Total revenue equals total expenditure]
Notes:
A balanced budget occurs when a government’s total revenue matches its total expenditure within a fiscal year. The concept is found in public finance literature and is used by various countries’ budgets. The Government of India’s budgets list balanced budgets when revenue and expenditure are equal with no deficit or surplus.
5. Which among the following is called India’s market watch dog?
[A] RBI
[B] SEBI
[C] NABARD
[D] SBI
Show Answer
Correct Answer: B [SEBI]
Notes:
The correct answer is SEBI (Securities and Exchange Board of India). SEBI was established in 1988 and became a statutory body in 1992. It regulates the securities market in India, protecting investor interests and promoting the development of the market. The RBI (Reserve Bank of India) primarily oversees monetary policy and banking regulation, while BSE (Bombay Stock Exchange) is a stock exchange, not a regulatory body.
6. Who benefits most in the short term from deflation if nominal income remains fixed?
[A] Salary earners with fixed wages
[B] Pensioners with fixed incomes
[C] Equity holders
[D] Borrowers with long-term fixed-rate debt
Show Answer
Correct Answer: A [Salary earners with fixed wages]
Notes:
When prices fall while nominal income stays unchanged, the purchasing power of that income rises. Salary earners with fixed wages can buy more goods and services for the same amount of money, so they gain in the short term. By contrast, borrowers usually lose because the real burden of repayment rises, while equity holders do not get a direct guaranteed benefit from deflation. This makes fixed-wage earners the best answer here.
7. Which condition leads to a decline in asset prices?
[A] Low liquidity in the economy
[B] High liquidity in the economy
[C] Central bank expanding liquid assets
[D] Central bank reducing policy rates
Show Answer
Correct Answer: A [Low liquidity in the economy]
Notes:
Low liquidity in the economy reduces available funds for investment and lending. Reduced lending causes a drop in demand for assets such as stocks and real estate. Historical episodes, including the 2008 Global Financial Crisis, showed falling liquidity preceded asset price declines. Central bank policies that tighten liquidity often cause comparatively lower market activity and asset devaluation.
8. Note Printing Press that belongs to RBI is located in?
[A] Nasik
[B] Dewas
[C] Mysore
[D] Chennai
Show Answer
Correct Answer: C [Mysore]
Notes:
The Reserve Bank of India (RBI) has two currency printing presses in India: Mysore, Karnataka and Salboni, West Bengal.
The RBI’s presses are owned by Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL), a subsidiary of the Reserve Bank. The other two currency presses in India are owned by the government and are located in Nasik and Dewas.
9. The term “cartelization” is mainly linked with which of the following groups?
[A] Small traders in local markets
[B] Independent firms formally agreeing to cooperate
[C] Individual investors in competitive markets
[D] Government-regulated monopolies
Show Answer
Correct Answer: B [Independent firms formally agreeing to cooperate]
Notes:
Cartelization describes independent firms entering formal agreements to control prices, limit supply, or divide markets. It typically involves actions such as price fixing or market-sharing. Cartelization is prohibited under the Competition Act, 2002 in India. In 2022, India’s Competition Commission imposed penalties on cement companies for cartelization. Cartels are illegal in many countries and are monitored by regulatory bodies to ensure market competition.
10. Which among the following is a qualitative tool of monetary policy?
[A] Bank Rate
[B] Credit Ceiling
[C] Credit rationing
[D] Cash Reserve Ratio
Show Answer
Correct Answer: C [Credit rationing ]
Notes:
The quantitative instruments are Open Market Operations, Liquidity Adjustment Facility (Repo and Reverse Repo), Marginal Standing Facility, SLR, CRR, Bank Rate, Credit Ceiling etc.
On the other hand, qualitative instruments are: credit rationing, moral suasion and direct action (by RBI on banks).
