Indian Economy MCQs

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David Ricardo, an English classical economist, developed the law of rent in 1809. He presented the law in his book On the Principles of Political Economy and Taxation in 1821.
Ricardo’s theory defined rent as the portion of the earth’s produce that is paid to the landlord for the original and indestructible powers of the soil. In other words, rent is the price paid for the use of land.
Ricardo developed his theory to explain the origin and nature of economic rent. He used the economy and rent to analyze the large rise in corn and land prices during the Napoleonic wars (1805-1815).
The term “Ricardian rent” comes from Ricardo’s theory.

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Entertainment Tax is listed under Entry 62 of List II (State List) in the Seventh Schedule of the Indian Constitution. Only state governments could levy and collect this tax before the introduction of Goods and Services Tax in July 2017. Post-GST, most components of Entertainment Tax were subsumed under GST, but states retained powers for some local bodies and specific categories.

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Pump priming refers to the collective measures taken by the governments during recession to simulate the economy during recession. This is done usually by cutting the taxes and increased public spending.

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Credit index derivatives have not been formally permitted for trading in India. The Reserve Bank of India released draft revised Master Directions on Credit Derivatives in 2022, proposing a regulatory framework for these products. Public consultation for these directions closed in February 2023, and final approval is pending. Only credit default swaps are currently permitted for eligible participants.

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The BSE SENSEX consists of 30 large, actively traded stocks. As of January 2026, BSE’s total market capitalization was approximately $5,001.331 billion. Historically, SENSEX 30 stocks account for around 30% of the BSE’s total market capitalization. The SENSEX was established in 1986 and is the primary benchmark index of the Bombay Stock Exchange.

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Prasantha Chandra Mahalanobis or P. C. Mahalanobis (1893-1972) was the first Indian statistician to receive world recognition. In 1933, Mahalanobis founded the first Indian statistical journal Sankhya, along the lines of Biometrika, which had inspired him greatly. He was architect of India’s second five year plan and due to this second plan is known as Mahalanobis model.

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A bear market occurs when securities prices fall 20% or more from recent highs. This decline is usually measured over at least a two-month period. Periods with such declines are marked by negative investor sentiment and widespread pessimism. The S&P 500 index has entered bear markets during several global economic downturns, including a 25% drop from June 2022 to June 2023.

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Liquidity trap is a situation when expansionary monetary policy does not increase the interest rate, income and hence does not encourage the economic growth.

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Forward guidance was widely adopted after the 2008 global financial crisis. The Federal Reserve began explicit forward guidance in 2011. The European Central Bank used this tool in 2013. The Bank of Japan started using forward guidance in 2013. Forward guidance aims to influence market expectations about future monetary policy. It became prominent when policy rates approached zero, limiting conventional monetary tools.

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Both are correct statementsRBI conducts open market operations by selling government securities in order to maintain ample liquidity in the system.