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. During inflation, how do banks usually set their loan prices?
[A] A decreasing trend
[B] Constant level
[C] No relation to inflation
[D] An increasing trend
Show Answer
Correct Answer: D [An increasing trend]
Notes:
Inflation reduces currency purchasing power and drives general price increases. Banks respond by raising loan prices due to higher costs, including increased wages and operational expenditures. Central banks often hike interest rates during inflation to control rising prices. Higher interest rates result in increased loan pricing by banks to maintain profit margins.
2. Who among the following is called father of Economics?
[A] David Hume
[B] Lamarck
[C] Adam Smith
[D] John Stuart Mill
Show Answer
Correct Answer: C [Adam Smith]
Notes:
Adam smith is considered as father of Modern Economics. In his book “The nature & causes of wealth of the Nation’s 1776, he has described economics as science of wealth. According to him economy is the study of wealth only and it deals with its production and consumption. Only material goods which are scarce and useful are wealth.
3. In which of the five year plan in India, the concept of Financial Inclusion was included for the first time?
[A] 8th Five Year Plan
[B] 9th Five Year Plan
[C] 10th Five Year Plan
[D] 11th Five Year Plan
Show Answer
Correct Answer: D [11th Five Year Plan]
Notes:
The 11th Five Year Plan was implemented from 2007-2012, when Manmohan Sigh was India’s Prime Minster. The main slogan for the 11th FYP was “Faster and more inclusive growth”. The 11th FYP made special emphasis on Financial Inclusion, poverty reduction, empowerment through education and skill development etc.
4. Which is called the “Soft Loan Window” of the World Bank?
[A] International Monetary Fund
[B] International Finance Corporation
[C] International Development Association
[D] World Trade Organization
Show Answer
Correct Answer: C [International Development Association]
Notes:
The International Development Association (IDA) was established in 1960 as part of the World Bank Group. IDA offers highly concessional loans and grants to the world’s poorest countries. As of fiscal year 2025, IDA has provided $600 billion to 116 countries. Its concessional loans typically have repayment periods of up to 40 years with long grace periods and low or zero interest.
5. Which tools and goals define fiscal policy?
[A] Managing interest rates and money supply
[B] Taxation and government spending to influence economy
[C] Open market operations for bank reserves
[D] Setting reserve requirements for banks
Show Answer
Correct Answer: B [Taxation and government spending to influence economy]
Notes:
Fiscal policy uses government taxation and spending to affect economic growth, employment, and inflation. Main tools are tax adjustments and expenditure management. These decisions are made through the government’s annual budget process. Fiscal policy is distinguished from monetary policy, which is implemented by central banks using instruments such as interest rates, reserve requirements, and open market operations.
6. If the people prefer to keep cash with them rather than deposits, which among the following impacts will be seen on the Money Supply of the country?
[A] The money supply of the country will increase
[B] The money supply of the country will decrease
[C] The money supply of the country will not change
[D] The money supply of the country may increase or decrease
Show Answer
Correct Answer: B [The money supply of the country will decrease]
Notes:
If people prefer to keep cash with them rather than making deposits in banks, the impact on the Money Supply of the country will be as follows:
[B] The money supply of the country will decrease.
The reason for this is that money supply is typically categorized into different measures, with M1 and M2 being common examples. M1 includes currency (physical cash) in circulation and demand deposits (checking accounts). When people hold more cash and make fewer deposits, it reduces the amount of money in demand deposits, which are considered a part of the money supply. Therefore, if people choose to keep more cash on hand, it reduces the overall money supply in the country, leading to a decrease.
7. During which five year plan The Khadi and Village Industries Commission was established ?
[A] First Five year Plan
[B] Second Five year Plan
[C] Third Five year Plan
[D] Fourth Five Year Plan
Show Answer
Correct Answer: B [Second Five year Plan]
Notes:
The Khadi and Village Industries Commission is a statutory body formed in April 1957 by the Government of India, under the Act of Parliament, ‘Khadi and Village Industries Commission Act of 1956’. It was second five year plan period then.
8. 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).
9. Which one of the following is NOT a sign of economic development?
[A] Changing structure of GDP in favour of industry
[B] Larger share of GDP coming from primary sector
[C] Larger capital inflows
[D] Institutional changes in an economy.
Show Answer
Correct Answer: C [ Larger capital inflows ]
Notes:
Larger capital inflows are not always sign of economic development.
10. At which HAL facility are MiG aircraft engines assembled and manufactured?
[A] Engine Division at Koraput, Odisha
[B] Engine Division at Bangalore, Karnataka
[C] Sukhoi Engine Division at Koraput, Odisha
[D] Nasik Airframe Factory, Maharashtra
Show Answer
Correct Answer: A [Engine Division at Koraput, Odisha]
Notes:
The Engine Division of Hindustan Aeronautics Limited at Sunabeda, near Koraput, Odisha, was established in 1964. It manufactures engines for MiG fighter aircraft, including R11, R25, R29B, and RD-33 series. Since 2007, the facility has produced RD-33 engines for MiG-29 aircraft under license from Russia. Over 1,300 engines have been manufactured at this division.
