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 among the following would most likely follow if the Reserve Bank of India effects selling of the securities?
[A] The cash resources at the disposal of the commercial banks increase.
[B] The cash resources at the disposal of the commercial banks get diminished.
[C] The cash resources of the commercial banks remain unchanged
[D] None of the above
Show Answer
Correct Answer: B [The cash resources at the disposal of the commercial banks get diminished.]
Notes:
The Reserve Bank of India starts selling the Government Securities, on behalf of the Government. Either the commercial banks or retail investors buy the securities, resulting in decrease of cash resources at the disposal of the commercial banks.
2. What is the main motive of the government behind having a dual price system & setting up of fair price shops?
[A] To demote speculation and hoarding
[B] To incentivise the trading of essential commodities
[C] To eliminate the monopoly of the traders and speculators
[D] To make the essential commodities available to the weaker sections of the society
Show Answer
Correct Answer: D [To make the essential commodities available to the weaker sections of the society]
Notes:
The main motive of the government behind setting up fair price shops is to provide essential commodities to people living below the poverty line. The government buys commodities from farmers at their desirable prices and sells them through fair price shops at half price. This allows people who are unable to buy things from the market due to high prices to purchase necessary products.
Fair price shops are also known as ration shops. Any family with a ration card can purchase a stipulated amount of food grains, sugar, kerosene, etc..
Dual pricing, also known as dynamic pricing or surge pricing, is a pricing strategy in which a business charges different prices for the same product or service based on factors such as demand, inventory levels, or weather conditions. The purpose of dual pricing is to drive other competitors out of the business in order to dominate a product niche or even an entire industry.
3. Which among the following is an example of Green Field Investment?
[A] Investment made by a real estate company in agriculture land to develop it later when the land prices increase
[B] Investment made by a company in a new factory complex in a remote land of the country where there was no facilities
[C] Investment made by a company to clean up a cement factory located in populated area because of its pollution and using it for a commercial office purpose
[D] )Investment made by a company to clean up a cement factory located in populated area because of its pollution and using it for a residential purpose
Show Answer
Correct Answer: B [Investment made by a company in a new factory complex in a remote land of the country where there was no facilities]
Notes:
A Green Field Investment refers to investing in a new project or facility on undeveloped land, where no previous structures exist. This contrasts with Brown Field Investments, which involve redeveloping or upgrading existing facilities. The correct answer, “Investment made by a company in a new factory complex in a remote land of the country where there were no facilities,” exemplifies this concept, as it involves building from the ground up in an untouched area. Green Field Investments are often associated with higher risks but can lead to important long-term benefits, such as job creation and economic development.
4. Which among the following body in India requires to protect the interests of consumers against anti-competitive practices of all market entities?
[A] National Consumer Forum
[B] Competition Commission of India
[C] National Consumer Disputes Redressal Commission
[D] Central Vigilance Commission
Show Answer
Correct Answer: B [Competition Commission of India]
Notes:
The Competition Commission of India (CCI) was set up to replace the anachronistic Monopolies and Restrictive Trade Practices Commission (MRTPC). It was established to eliminate practices that adversely affect competition in different industries/areas and protect interests of consumers and ensure freedom of trade. The Competition Act of 2002 called for the creation of CCI. However, it was established in 2003 and became fully functional only by 2009. The CCI is a quasi-judicial body which gives opinions to statutory authorities and also deals with other cases. It has one chairman and six members. It is the youngest and the only cross-sector regulator in India.
5. Which of the following statements best describes a progressive tax system?
[A] The tax rate decreases as the taxable amount increases
[B] The tax rate stays the same regardless of the taxable amount
[C] The tax rate increases as the taxable amount increases
[D] The tax rate is randomly determined
Show Answer
Correct Answer: C [The tax rate increases as the taxable amount increases]
Notes:
In a progressive tax system, higher income earners pay a higher tax rate compared to those who earn less. This is based on the assumption that individuals who earn more have the ability and the capacity to pay more taxes. Most income tax systems in the world are progressive, including the United States, Canada, and the United Kingdom.
6. In context with banking and Finance markets, what is Collateralized Borrowing and Lending Obligation (CBLO)”, ?
[A] Its an scheme for exporters who need to fulfill some obligations while seeking its benefit
[B] It’s a process of Reserve bank of India to lend money to the State Governments for short term under certain obligations
[C] It’s a money Market Instrument of Reserve bank of India
[D] It’s a future trading obligation in currency future markets
Show Answer
Correct Answer: C [It’s a money Market Instrument of Reserve bank of India]
Notes:
Collateralized Borrowing and Lending Obligation (CBLO) is a money market instrument introduced by the Reserve Bank of India (RBI) to facilitate borrowing and lending among banks and financial institutions. It allows participants to borrow funds against collateral, typically government securities, for short-term needs. CBLO helps enhance liquidity in the money market and is governed by the Clearing Corporation of India Ltd. (CCIL). It is particularly useful for managing liquidity mismatches and is a key tool in the Indian financial system.
7. The targets from fifth five year plan were set with respect to which of the following parameters?
[A] National Income
[B] Net Domestic Product
[C] Gross Domestic Product at Factor Cost
[D] Gross Domestic Product at Market Cost
Show Answer
Correct Answer: C [Gross Domestic Product at Factor Cost]
Notes:
Targets for the first three plans were set with respect to National Income. Fourth Plan it was Net Domestic Product. In all Plans thereafter it has been Gross Domestic Product at factor cost.
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. Foreign Direct Investment(FDI) and Foreign Institutional Investment(FII) are distinct in terms of?
[A] FDI brings capital, technology & management and FII brings only capital
[B] FDI targets specific sectors and FII help in increasing foreign capital availability
[C] FII is considered more stable
[D] FII targets both primary and secondary market while FDI targets only primary.
Show Answer
Correct Answer: A [FDI brings capital, technology & management and FII brings only capital]
Notes:
Foreign Direct Investment (FDI) involves long-term investments in physical assets, bringing capital, technology, and management expertise to a country. In contrast, Foreign Institutional Investment (FII) primarily involves short-term capital investments in financial markets, such as stocks and bonds, without direct control over businesses. FDI is typically more stable and less volatile than FII, which can quickly exit markets, impacting local economies. FDI often targets specific sectors for development, while FII can invest across various market segments.
10. Which among the following is the top seafood exporting port of India in terms of dollar value?
[A] Visakhapatnam
[B] Tuticorin
[C] Kochi
[D] Mangalore
Show Answer
Correct Answer: A [ Visakhapatnam ]
Notes:
Visakhapatnam port is the major seafood exporting port in terms of dollar value (22.59%). Pipavav is the major port in terms of quantity (25.27%).