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. The Core inflation is different from the general inflation because of the following?
[A] Core Inflation is caused by the supply Shock in certain essential commodities
[B] Core Inflation is the sudden increase in certain items of food grains
[C] Core Inflation is the inflation rate of a particular basket of commodities
[D] Core Inflation is just a misnomer
Show Answer
Correct Answer: C [Core Inflation is the inflation rate of a particular basket of commodities]
Notes:
Core Inflation is the rate of inflation calculated to exclude certain items that are subject to sudden and short-lived price movements, mainly food and energy. Core inflation is considered a better indicator of overall long-term than un-adjusted headline inflation.
2. Which among the following is an anti-inflationary measure?
[A] Stagflation
[B] Hyper inflation
[C] Disinflation
[D] Deflation
Show Answer
Correct Answer: C [Disinflation]
Notes:
Disinflation refers to a reduction in the rate of inflation. In other words, prices may still rise, but they rise more slowly than before. This makes disinflation an anti-inflationary measure because it eases the pace of price increase without necessarily causing a fall in the overall price level. It is different from deflation, which means a persistent decline in the general price level.
3. The unemployment of a person when he/she is in the midst of transitioning between jobs or searching for a new job comes under which category?
[A] Cyclical
[B] Voluntary
[C] Frictional
[D] Seasonal
Show Answer
Correct Answer: C [Frictional]
Notes:
Frictional unemployment refers to short-term unemployment that happens when people are changing jobs, entering the labour market, or looking for work that matches their skills. It is a normal feature of a dynamic economy because workers do not move instantly into new jobs. This type is different from cyclical unemployment, which rises during recessions, and seasonal unemployment, which occurs in specific seasons or periods of the year.
4. In context with the macroeconomics , Philips Curve is a relationship between the rates of ___?
[A] Unemployment & Exim trade
[B] Unemployment and Inflation
[C] Unemployment and Demand
[D] Unemployment and Poverty
Show Answer
Correct Answer: B [Unemployment and Inflation]
Notes:
Phillips curve developed by A. W. Phillips says that the inflation and unemployment have a stable and inverse relationship; which means that higher inflation is associated with lower unemployment and vice versa. However, later it was proved that this curve is applicable only in the short-run, and in long-run, inflationary policies would not decrease unemployment.
5. Where can popular tourist attractions such as Chatham Saw Mill, Wandoor Beach, Mount Manipur and Limestone Caves be found?
[A] Goa
[B] Andaman and Nicobar Islands
[C] Lakshadweep
[D] Tamil Nadu
Show Answer
Correct Answer: B [Andaman and Nicobar Islands]
Notes:
Chatham Saw Mill, Wandoor Beach, Mount Manipur and the Limestone Caves are all well-known attractions in the Andaman and Nicobar Islands. Chatham Saw Mill is located near Port Blair, Wandoor Beach is a popular coastal spot on South Andaman, Mount Manipur is the renamed Mount Harriet peak, and the limestone caves are famous in Baratang. Together, these sites point to the Andaman and Nicobar Islands, a Union Territory in the Bay of Bengal.
6. Which among the following authority appoints a Deputy Governor in Reserve Bank of India?
[A] Governor of RBI
[B] Central Board of Directors
[C] Central Government
[D] Committee of the Central Board
Show Answer
Correct Answer: C [Central Government]
Notes:
The correct answer is “Central Government.” In India, the Deputy Governors of the Reserve Bank of India (RBI) are appointed by the Central Government under Section 8 of the Reserve Bank of India Act, 1934. The RBI has four Deputy Governors, and their roles include overseeing various departments such as monetary policy, financial markets, and banking regulation. This appointment process reflects the government’s influence on the central bank’s operations.
7. Consider the following:
- Short Term Funds
- Medium Term Funds
- Long Term Funds
Which among the above is/ are dealt in the Indian Capital Market?
[A] 1 & 2
[B] 2 & 3
[C] 1 & 3
[D] 1, 2 & 3
Show Answer
Correct Answer: B [2 & 3]
Notes:
Short Term Funds – Indian Money Market,
Medium and Long Term Funds- Indian Capital Market
8. Which among the following was not stipulated in the Fiscal Responsibility and Budget Management (FRBM) Act, 2003?
[A] Elimination of revenue deficit
[B] Elimination of primary deficit
[C] Non-borrowing by the Central Government from RBI except in certain situations
[D] Fixing government guarantees in any financial year as a percentage of GDP
Show Answer
Correct Answer: B [Elimination of primary deficit]
Notes:
The FRBM Act, 2003 was designed to promote fiscal discipline by laying down targets such as eliminating revenue deficit, reducing fiscal deficit, and restricting direct borrowing from the RBI except in specified situations. It also provided for monitoring of contingent liabilities and related fiscal parameters. However, it did not prescribe elimination of the primary deficit as a statutory target. Therefore, option 2 is the correct answer.
9. The Laffer curve is the graphical representation of :
[A] The relationship between tax rates and absolute revenue these rates generate for the government.
[B] The inverse relationship between the rate of unemployment and the rate of inflation in an economy.
[C] The inequality in income distribution
[D] The relationship between environmental quality and economic development.
Show Answer
Correct Answer: A [The relationship between tax rates and absolute revenue these rates generate for the government.]
Notes:
In economics, the Laffer curve is a hypothetical representation of the relationship between government revenue raised by taxation and all possible rates of taxation. It is used to illustrate the concept of taxable income elasticity – that taxable income will change in response to changes in the rate of taxation.
10. RBI applies the principle of reciprocity to which type of banks?
[A] Private Banks
[B] Foreign Banks
[C] Regional Rural Banks
[D] Urban Cooperative Banks
Show Answer
Correct Answer: B [Foreign Banks]
Notes:
The Reserve Bank of India applies the reciprocity principle to foreign banks operating in India. This allows foreign banks similar operating rights as Indian banks only if Indian banks receive comparable treatment in the respective foreign country. RBI norms on subsidiarization, updated in November 2013, emphasize this guideline for foreign banks. Indian-Singapore banking agreements in 2015 reflected application of this principle.
