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. In which year, Planning Commission was established in India?
[A] 1950
[B] 1951
[C] 1952
[D] 1955
Show Answer
Correct Answer: A [1950]
Notes:
Planning Commission was set up by a Government of India Resolution in 1950 as an advisory and specialized institution. It was charged with the responsibility to formulate a strategy of development for independent India in a long-term perspective and for making assessment of all resources of the country, augmenting deficient resources, formulating plans for the most effective and balanced utilization of resources and determining priorities.
2. 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.
3. The unemployment of a person when he/ she is in midst of transiting between jobs, searching for new job comes under the which of the following category?
[A] Cyclical
[B] Voluntary
[C] Frictional
[D] Seasonal
Show Answer
Correct Answer: C [Frictional]
Notes:
The correct answer is Frictional unemployment. This type occurs when individuals are temporarily unemployed while transitioning between jobs or searching for new employment. It reflects the time taken for job seekers to find a position that matches their skills and preferences. Frictional unemployment is a natural part of a healthy economy, as it indicates mobility in the labor market. According to the U.S. Bureau of Labor Statistics, frictional unemployment typically accounts for about 2-3% of the total unemployment rate.
4. Which among the following does not come under the monetary policy for regulating the economy?
[A] Discount rate
[B] Government spending
[C] reserve requirement
[D] Open market Operations
Show Answer
Correct Answer: B [Government spending]
Notes:
Government spending refers to the money spent by the government or public sector on the acquisition of goods and services such as education, healthcare, social protection, defence etc. It does not come under monetary policy.
5. Which condition leads to a decline in asset prices?
[A] Low liquidity in the economy
[B] High liquidity in the economy
[C] Central bank expanding liquid assets
[D] Central bank reducing policy rates
Show Answer
Correct Answer: A [Low liquidity in the economy]
Notes:
Low liquidity in the economy reduces available funds for investment and lending. Reduced lending causes a drop in demand for assets such as stocks and real estate. Historical episodes, including the 2008 Global Financial Crisis, showed falling liquidity preceded asset price declines. Central bank policies that tighten liquidity often cause comparatively lower market activity and asset devaluation.
6. Inflation Indexed Bonds is pegged to ___?
[A] WPI
[B] CPI
[C] Both WPI and CPI
[D] None of the above
Show Answer
Correct Answer: A [WPI]
Notes:
Inflation Indexed Bonds (IIBs) are pegged to the Consumer Price Index (CPI). This means their interest payments and principal value adjust based on changes in the CPI, which measures the average change over time in the prices paid by consumers for goods and services. IIBs aim to protect investors from inflation, ensuring that the purchasing power of their returns is maintained. In India, the CPI is the primary measure for these bonds, while the Wholesale Price Index (WPI) measures price changes at the wholesale level and is not used for IIBs.
7. Who published the Global Competitiveness Report until 2020?
[A] World Bank
[B] International Monetary Fund
[C] World Economic Forum
[D] World Trade Organization
Show Answer
Correct Answer: C [World Economic Forum]
Notes:
The World Economic Forum published the Global Competitiveness Report annually from 2004 to 2020. The report used the Global Competitiveness Index to assess countries’ economic fundamentals, institutions, and policies. The Global Competitiveness Report was discontinued after 2020 and is not currently published by any organization.
8. With reference to the World Trade Organization, the principle of reciprocity within WTO framework envisages?
[A] Lowering of trade barriers by a State to be matched in return.
[B] Creation of trade barriers on uniform basis
[C] Protection of intellectual property rights.
[D] Enhanced role for State controls on trade
Show Answer
Correct Answer: A [ Lowering of trade barriers by a State to be matched in return. ]
Notes:
The principle of reciprocity in the WTO framework means that when one member lowers trade barriers, other members are expected to do the same in return. This mutual concession promotes fair trade practices and encourages countries to engage in negotiations. Reciprocity is fundamental to the WTO’s goal of reducing trade barriers globally, fostering a more open and equitable trading system.
9. Which issue caused the collapse of Doha Round WTO talks in July 2008?
[A] Elimination of agricultural export subsidies
[B] Special safeguard mechanism for developing countries in agriculture
[C] Tariff elimination timelines in industrial products
[D] Intellectual property rights protections
Show Answer
Correct Answer: B [Special safeguard mechanism for developing countries in agriculture]
Notes:
The Doha Round negotiations collapsed in July 2008 over disagreements regarding the special safeguard mechanism (SSM) for developing countries in agriculture. The SSM was meant to allow developing nations to raise tariffs temporarily in response to import surges. India and China sought more flexibility, which the United States and others opposed, leading to a breakdown.
10. Who determines prices in a capitalist economy?
[A] Government
[B] Market forces
[C] Big corporates
[D] None of the above
Show Answer
Correct Answer: B [Market forces]
Notes:
In a capitalist economy, prices are set by demand and supply, collectively known as market forces. Government intervention is minimal. Prices fluctuate based on consumer preference and availability of goods, ensuring efficient allocation of resources within the economy.
