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. What is the Bank Rate in relation to RBI and commercial banks?
[A] RBI lends long-term loans to banks without requiring collateral or repurchase agreement
[B] RBI lends short-term loans to banks with government securities as collateral
[C] Commercial banks lend to customers
[D] Banks borrow overnight funds from RBI
Show Answer
Correct Answer: A [RBI lends long-term loans to banks without requiring collateral or repurchase agreement]
Notes:
The Bank Rate is the interest rate at which the Reserve Bank of India lends long-term funds to commercial banks without any collateral or repurchase agreement. The RBI notifies the Bank Rate, and it is generally above the Repo Rate. The Bank Rate has been used by RBI since the Reserve Bank of India Act, 1934, to manage liquidity and regulate money supply.
2. 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.
3. 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.
4. Which among the following is considered to be the best measure of an increase in a country’s economic efficiency?
[A] Increase in annual private investment
[B] Increase in real national income
[C] Increase in real per capita income
[D] Increase in net annual investment
Show Answer
Correct Answer: C [Increase in real per capita income]
Notes:
Per capita income is a measure of the average income earned per person in a given area (usually in a country) in a particular year. When this figure is adjusted for inflation, the real per capita income is obtained, which gives the best measure of an increase in a country’s economic efficiency.
5. Which defines fiduciary issue of currency notes?
[A] The portion of notes issued beyond metallic reserves, backed by trust or securities
[B] The issue of notes with metallic backing
[C] The issue of notes without any metallic backing
[D] The issue of notes with partial metallic backing
Show Answer
Correct Answer: A [The portion of notes issued beyond metallic reserves, backed by trust or securities]
Notes:
Fiduciary issue is the amount of currency notes issued in excess of gold or silver reserves, backed by government securities or public trust. The Bank Charter Act of 1844 introduced the fiduciary system in England, limiting note issue not fully backed by gold. Modern systems such as those used by the Reserve Bank of India also use the fiduciary issue principle.
6. 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 means the decrease in the rate of inflation. It is a slowdown in the rate of increase of price levels of goods and services. This is different from deflation, in the way that Disinflation is only a marginal and short term decrease in rate of inflation.
7. In the abbreviation APEDA, what does P stand for ?
[A] Pisciculture
[B] Products
[C] Processed Food Products
[D] Promotion
Show Answer
Correct Answer: C [Processed Food Products]
Notes:
Agricultural and Processed Food Products Export Development Authority (APEDA) is an apex body under the Ministry of Commerce and Industry, Government of India, responsible for the export promotion of agricultural products. Its headquarters are located in New Delhi. It is a statutory body established under the Agricultural and Processed Food Products Export Development Authority Act passed by the Parliament in December, 1985.
8. Which of these is a negotiable instrument?
[A] Airway bill
[B] Bank note
[C] Letter of credit
[D] Demand draft
Show Answer
Correct Answer: B [Bank note]
Notes:
Bank notes are defined as negotiable instruments under the Reserve Bank of India Act, 1934. They are payable to bearer on demand and transferable by delivery. Bank notes circulate as legal tender in India and other countries. Negotiable Instruments Act, 1881 governs negotiable instruments in India, specifically mentioning promissory notes, bills of exchange, and cheques.
9. Ad valorem tax is levied on which of the following?
[A] The price of a commodity
[B] The value added to a product
[C] The assessed value of property or transaction
[D] The unit of the commodity
Show Answer
Correct Answer: C [The assessed value of property or transaction]
Notes:
Ad valorem tax is calculated as a percentage of the assessed value of property or transaction. Sales tax, property tax, and import duties are common examples. This tax is proportional to the value, not a fixed amount per unit. The term originates from Latin meaning “according to value.” The assessed value is used to determine the actual tax liability.
10. At which of the following levels , Central Cooperative Banks are established in India?
[A] District Level
[B] State Level
[C] Inter-state level
[D] India Level
Show Answer
Correct Answer: A [District Level]
Notes:
Central Cooperative Banks in India are established at the District Level. They serve as the primary financial institutions for rural and agricultural development, providing credit and financial services to cooperatives and farmers. Established under the Cooperative Societies Act, they play a crucial role in the cooperative credit structure, facilitating access to loans and promoting economic development at the grassroots level.
