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. Which of the following is NOT related to the World Trade Organization (WTO)?
[A] Multifiber Agreement
[B] General Agreement on Trade and Services
[C] Multilateral Agreement on Investment
[D] Agreement on Agriculture
Show Answer
Correct Answer: C [ Multilateral Agreement on Investment ]
Notes:
The basic functioning of WTO depends upon: 1. Multifiber Agreement (MFA) 2. Agreement on Agriculture (AoA), Trade Related Investment Measures (TRIMS), Trade Related Intellectual Property Right (TRIPS), General Agreement on Trade and Services (GATS). Multilateral Agreement on Investment is among OECD countries.
2. Which among the following correctly denotes Reserve Money?
[A] Currency in circulation
[B] Currency in Circulation + Other deposits of the General Public with RBI
[C] Currency in circulation + Other deposits of the general Public with RBI + Cash held with the banks
[D] Currency in circulation + Other deposits of the general Public with RBI + Cash held with the banks + Banker’s Deposits with RBI
Show Answer
Correct Answer: D [Currency in circulation + Other deposits of the general Public with RBI + Cash held with the banks + Banker’s Deposits with RBI]
Notes:
Reserve money is also called High Powered Money / central bank money. It is the Currency in Circulation plus Deposits of Commercial Banks with RBI.
3. What does FDI trigger list comprises of _______?
[A] List of country-specific FDI restrictions
[B] List of all FDI proposals
[C] Permissions required to make FDI in India
[D] investors with suspected illegal sources of funds or linkages, sensitive areas (like aviation, telecommunications etc) and sensitive locations (like Jammu & Kashmir) for special scrutiny.
Show Answer
Correct Answer: D [investors with suspected illegal sources of funds or linkages, sensitive areas (like aviation, telecommunications etc) and sensitive locations (like Jammu & Kashmir) for special scrutiny.]
Notes:
The FDI trigger list in India includes investors with suspected illegal sources of funds or linkages, as well as sensitive areas like aviation and telecommunications, and sensitive locations such as Jammu & Kashmir. This scrutiny is part of India’s efforts to safeguard national security and economic interests. The Foreign Direct Investment (FDI) policy is regulated by the Department for Promotion of Industry and Internal Trade (DPIIT) in India, which aims to attract foreign investment while ensuring compliance with national regulations.
4. Which among the following is one among the five indicators used by the United Nations Development Programme in its annual Human Development Report for Gender related standard of living?
[A] Gender Development Index
[B] Gender Empowerment Index
[C] Gender Empowerment Measure
[D] Gender Parity Index
Show Answer
Correct Answer: A [Gender Development Index]
Notes:
The correct answer is Gender Development Index (GDI). The GDI is one of the five indicators used by the United Nations Development Programme (UNDP) to assess gender disparities in human development. It measures the differences in human development achievements between women and men, focusing on life expectancy, education, and income. The GDI was introduced in the 1995 Human Development Report to highlight gender inequalities in development.
5. For the first time in India, in which of the following Budgets “basic reforms in the international financial and trading system ” was stressed in India?
[A] 1969
[B] 1980
[C] 1983
[D] 1984
Show Answer
Correct Answer: C [1983]
Notes:
In the 1983 Budget, Finance Minister R. Venkataraman emphasized “basic reforms in the international financial and trading system” for the first time in India. This was a pivotal moment as it marked a shift towards liberalization and modernization of India’s economy, laying the groundwork for future reforms in the 1990s. The 1983 Budget aimed to address economic challenges and improve India’s global trade position.
6. Which among the following rates play most important role in sucking out the liquidity in the system?
[A] Repo Rate
[B] Cash Reserve Ratio
[C] Prime Lending Rate
[D] BPLR
Show Answer
Correct Answer: B [Cash Reserve Ratio]
Notes:
Some of the major tools to suck the excess liquidity out of the system standing deposit facility (SDF), narrowing the liquidity adjustment facility (LAF), increase repo rate, cash reserve ratio etc.
7. Euribor is a term associated with which of the following?
[A] An International Financial Company
[B] An association of European Financial Service providers
[C] A reference rate for Euro Money Market
[D] A credit rating agency of Europe
Show Answer
Correct Answer: C [A reference rate for Euro Money Market]
Notes:
Euribor (Euro Interbank Offered Rate )is similar to LIBOR (London Interbank Offer rate)
8. Which among these is most volatile Foreign Capital?
[A] External Commercial Borrowings
[B] Foreign Direct Investment
[C] Loans from International Financial Institutions
[D] Foreign Portfolio Investment
Show Answer
Correct Answer: D [Foreign Portfolio Investment]
Notes:
The correct answer is Foreign Portfolio Investment (FPI). FPI is considered the most volatile form of foreign capital because it involves investments in financial assets like stocks and bonds, which can be quickly bought or sold. Unlike Foreign Direct Investment (FDI), which is typically long-term and involves direct ownership in businesses, FPI can fluctuate rapidly based on market conditions and investor sentiment. For instance, during economic uncertainty, FPI can exit markets swiftly, leading to important capital flight. In contrast, FDI and loans from international financial institutions tend to be more stable and long-term commitments.
9. Economic growth is normally coupled with?
[A] Inflation
[B] Hyper Inflation
[C] Deflation
[D] Stagflation
Show Answer
Correct Answer: A [Inflation]
Notes:
Economic growth results in higher disposable income available with the consumers which increases the overall demand along with the supply available for the consumers. This increase in demand spurs inflation, which eventually becomes a necessary evil for a growing economy.
10. If the Reserve Bank of India wants to increase the Cash Reserves commercial Banks, which among the following would be the most probable step taken by it ?
[A] Release Gold from its reserves
[B] Buy bonds in the open market
[C] Prohibit the transactions that involve bill of exchange
[D] Increase the tranche reserves with the IMF
Show Answer
Correct Answer: B [Buy bonds in the open market]
Notes:
When RBI buys bonds in the open market, Banks get money and Cash Reserves would increase.
