Indian Economy MCQs
Indian Economy Multiple Choice Questions (MCQs) for State and UPSC Civil Services Examinations. Objective Questions on Indian Economy for competitive examinations.
1. Which of the following is not a correct statement with respect to Masala Bonds?
[A] They allow Indian companies to raise overseas debts in Indian currency
[B] Interest Payment on Masala Bonds is in Indian Rupee
[C] Most popular market for Masala Bonds is New York currently
[D] All of the above are correct statements
Show Answer
Correct Answer: C [Most popular market for Masala Bonds is New York currently]
Notes:
Masala bonds allow Indian companies to raise overseas debt in the Indian currency. The instrument shields the issuers from currency fluctuations mainly because interest payments and redemption is in rupees. At the same time, investors get interest rates that are higher than in their domestic markets. In third statement, the most popular market for Masala bonds currently is London.
2. Which among the following is considered to be the main determinant of the level of activity is in national income terms?
[A] The level of taxation
[B] Realized investment
[C] Planned saving
[D] Factor mobility
Show Answer
Correct Answer: B [Realized investment]
Notes:
Realized Investment means an Investment resulting in a sale, transfer or restructuring of a good or service. It is considered to be the main determinant of the level of activity in national income.
3. In the history of Independent India, a note of highest denomination has been of ___?
[A] Rs. 5000
[B] Rs. 1000
[C] Rs. 2000
[D] Rs. 10000
Show Answer
Correct Answer: D [Rs. 10000]
4. In context with the financial markets , which among the following is not allowed at present in India?
[A] currency futures
[B] interest rate futures
[C] credit default swaps (CDS)
[D] Commodity future
Show Answer
Correct Answer: C [credit default swaps (CDS)]
5. Which among the following country is world’s largest user nitrogenous fertilizers?
[A] United States
[B] India
[C] China
[D] Canada
Show Answer
Correct Answer: C [China]
6. Which among the following group best fits in a definition of a ‘shadow banking system’?
[A] Scheduled Commercial Banks, Non Banking Finance Companies, Hedge Funds
[B] Non banking Finance Companies, Investment banks, Hedge funds
[C] Scheduled Commercial Banks, Private Banks and NBFC’s
[D] Scheduled Commercial banks, Cooperative Banks and Investment Banks
Show Answer
Correct Answer: B [Non banking Finance Companies, Investment banks, Hedge funds]
7. Which of the following Price Indices of India is considered for measuring ‘Headline Inflation’?
[A] GDP Deflator
[B] CPI-AL/RL
[C] CPI-IW
[D] WPI
Show Answer
8. Continuous increase in tax rates will result in:
[A] Continuous increase in tax revenue of government
[B] Continuous decrease in tax revenue of government
[C] Increase in tax revenue up to a point and then decrease
[D] Decrease in tax revenue up to a point and then increase
Show Answer
Correct Answer: C [ Increase in tax revenue up to a point and then decrease ]
Notes:
9. Which among the following is a correct definition of the “Inflationary gap”?
[A] The difference between total spending at full employment level and total spending above that level.
[B] The difference between the price of a product at a time and price of that product at some different time
[C] Difference between the national expenditure and total expenditure
[D] Difference between Estimated fiscal deficit and actual fiscal deficit
Show Answer
Correct Answer: A [ The difference between total spending at full employment level and total spending above that level. ]
Notes:
10. With reference to various sources of the tax revenue of the Government of India, consider the following observations: 1. The contribution of Corporation Tax is significantly larger in comparison to the contribution of Income Tax 2. The contribution of Custom Duty is significantly larger in comparison to the contribution of Service Tax Which among the above observations is / are correct?
[A] Only 1
[B] Only 2
[C] Both 1 & 2
[D] Neither 1 nor 2
Show Answer
Correct Answer: A [ Only 1 ]
Notes: 
