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 is a most suitable example of double counting in national income ?
[A] Wages of bus and train drivers
[B] Cotton output and cotton cloth output
[C] Electricity output and water output
[D] Tax receipts and earnings of inland revenue officials
Show Answer
Correct Answer: B [Cotton output and cotton cloth output]
Notes:
While estimating the national income, the problem of double counting occurs when the value of some goods and services are counted more than once. Cotton output and cotton cloth output both the raw material and the final result are counted.
2. National Rural Credit Stabilization Fund is a Institution of purpose-specific funds in which of the following?
[A] IDBI
[B] SIDBI
[C] IFCI
[D] NABARD
Show Answer
Correct Answer: D [NABARD]
Notes:
The National Rural Credit stabilization fund is a sector specific finds maintained with National Bank for Agriculture and Rural Development. This fund includes contributions from Central and State Governments, sums contributed by RBI and the sums contributed by NABARD’s board every year.
3. Which organization aids members in balance of payments problems?
[A] World Bank
[B] International Monetary Fund
[C] Asian Development Bank
[D] World Economic Forum
Show Answer
Correct Answer: B [International Monetary Fund]
Notes:
The International Monetary Fund was created in 1944 at the Bretton Woods Conference. Its main function is to provide temporary financial assistance to member countries facing balance of payments deficits. The IMF uses facilities like Stand-By Arrangements and Extended Fund Facility. Membership includes 190 countries as of 2023. The IMF also conducts economic surveillance and policy advice, but direct financial support for balance of payments stability is its core function.
4. Which is NOT a source of government tax revenue?
[A] Excise taxes on gasoline and cigarettes
[B] Property taxes
[C] Customs duties and tariffs
[D] Fees and charges for government services
Show Answer
Correct Answer: D [Fees and charges for government services]
Notes:
Fees and charges for government services refer to user charges for specific services like public utilities, hospital fees, and tolls. These are not taxes, which are compulsory payments. Tax revenue sources include excise taxes, property taxes, and customs duties. User charges represent voluntary payments for direct services and are classified as non-tax revenue.
5. Economic Planning comes under which of the following lists ?
[A] Union List
[B] Concurrent list
[C] State List
[D] None of them
Show Answer
Correct Answer: B [Concurrent list]
Notes:
Economic Planning refers to any plans of economic activity which point to achieve specific social and economic outcomes. It is a subject matter of concurrent list in 7th schedule of Indian constitution.
6. 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.
7. Which statement about White Label ATMs is correct?
[A] ATMs owned by foreign companies
[B] ATMs owned by private ATM service providers, not banks
[C] ATMs outsourced by banks with sponsor branding
[D] ATMs owned by the government
Show Answer
Correct Answer: B [ATMs owned by private ATM service providers, not banks]
Notes:
White Label ATMs in India are owned and operated by non-banking entities authorized by the Reserve Bank of India since 2012. These ATMs do not display any bank logo and can be used by customers of any bank for basic transactions. Tata Communications Payment Solutions was the first company to set up White Label ATMs under the ‘Indicash’ brand in India.
8. What does the greenshoe option allow underwriters to do during an IPO?
[A] Sell up to 15% additional shares beyond the original offering
[B] Record investor demands and change IPO pricing
[C] Purchase shares back from investors at a discount
[D] None of the above
Show Answer
Correct Answer: A [Sell up to 15% additional shares beyond the original offering]
Notes:
The greenshoe option is an IPO underwriting clause first used by Green Shoe Manufacturing Company. It allows underwriters to sell up to 15% extra shares above the original IPO amount to support share price stability and meet demand. The Securities and Exchange Commission permits this clause. The option helps underwriters stabilize prices by covering over-allotted shares in the aftermarket.
9. What does “bear market” mean in stock market terminology?
[A] A period when stock prices rise steadily
[B] Foreign investors outperform domestic investors
[C] Higher investment in money market than capital market
[D] Stock prices fall 20% or more from recent highs for at least two months
Show Answer
Correct Answer: D [Stock prices fall 20% or more from recent highs for at least two months]
Notes:
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.
10. What is amortization in banking?
[A] A lump-sum repayment of loan at maturity
[B] Gradual repayment with both principal and interest
[C] Payment of interest only, principal at end
[D] Writing off intangible asset expenses
Show Answer
Correct Answer: B [Gradual repayment with both principal and interest]
Notes:
Amortization refers to scheduled loan repayment through periodic payments including both principal and interest. Each payment gradually reduces the outstanding loan balance. Early payments cover more interest; later ones pay more principal. Mortgages and term loans typically follow an amortization schedule with set time frames like 15 or 30 years. The balance decreases with every regular installment.
