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 economic law states “bad money drives out good money”?
[A] Wagner’s law
[B] Keynes’ law
[C] Grimm’s law
[D] Gresham’s law
Show Answer
Correct Answer: D [Gresham’s law]
Notes:
Gresham’s law, enunciated by Sir Thomas Gresham, states that inferior currency (bad money) in circulation displaces valuable or superior currency (good money) if both are accepted at same face value, as people hoard the good currency and spend the bad.
2. In September 1999, which organization established the Poverty Reduction and Growth Facility (PRGF) to make the objectives of poverty reduction and growth more central to lending operations in its poorest member countries?
[A] Asian Development Bank
[B] International Monetary Fund
[C] World Bank
[D] US Federal Bank
Show Answer
Correct Answer: B [International Monetary Fund]
Notes:
The Poverty Reduction and Growth Facility (PRGF) was set up by the International Monetary Fund in September 1999. Its objective was to formulate policies focusing on growth and poverty reduction.
3. Rs. 100 notes are printed at which locations in India?
[A] Nashik and Dewas only
[B] Mysore and Salboni only
[C] Nashik, Dewas, Mysore and Salboni only
[D] Noida and Hoshangabad
Show Answer
Correct Answer: C [Nashik, Dewas, Mysore and Salboni only]
Notes:
Indian banknotes are printed at four currency presses in the country. Two presses operated by SPMCIL are located at Nashik and Dewas, while the other two presses run by BRBNMPL are at Mysuru and Salboni. These four locations together handle the printing of ₹100 notes and other denominations as per RBI requirements. Hence, the correct answer is the combination of all four printing locations.
4. India’s first Export Promotion Industrial park was opened in:
[A] Delhi
[B] Nagpur
[C] Jaipur
[D] Bangalore
Show Answer
Correct Answer: C [Jaipur]
Notes:
India’s first Export Promotion Industrial Park (EPIP) was opened in Jaipur. The EPIP in Rajasthan at Sitapura is complete. The park is the largest Export-Park in Northern India.
The EPIP scheme was implemented to create infrastructure for exports in specific locations. The parks have modern infrastructure to boost the export of commodities and services. Units in the EPIP must commit to exporting at least 33% of their production.
5. When does RBI sell government securities via Open Market Operations?
[A] During liquidity deficit from heavy government borrowing
[B] When foreign funds inflow is low
[C] When banks face fund shortages
[D] During surplus liquidity from large foreign capital inflows
Show Answer
Correct Answer: D [During surplus liquidity from large foreign capital inflows]
Notes:
The Reserve Bank of India conducts Open Market Operations to manage liquidity. It sells government securities when there is surplus liquidity, such as during large foreign capital inflows that increase rupee supply. Selling securities absorbs excess funds from the banking system. In periods of liquidity shortage, RBI buys securities. In FY26, liquidity injections were handled through purchases, not sales.
6. What is the main reason companies issue sweat equity shares?
[A] To provide more profits to retail investors
[B] To reduce cash flow requirements for compensation
[C] To retain and attract top talent via ownership stakes
[D] To save taxes on employee compensation
Show Answer
Correct Answer: C [To retain and attract top talent via ownership stakes]
Notes:
Sweat equity shares are offered to employees or directors for their work or know-how, as per Section 54 of the Companies Act, 2013. Such shares are issued to retain and attract skilled personnel by granting ownership stakes without immediate cash outflow. SEBI regulates sweat equity issuance for listed companies. Companies often use sweat equity during initial stages to incentivize and retain employees without cash expenditure.
7. Miadi Hundi is similar to which financial instrument?
[A] A post-dated Cheque
[B] A demand Draft
[C] A usance Bill of Exchange
[D] A Promissory Note
Show Answer
Correct Answer: C [A usance Bill of Exchange]
Notes:
Miadi Hundi, also known as Muddati Hundi, is payable after a specified period. A usance bill of exchange is a negotiable instrument also payable after a certain period, not on demand. Unlike Darshani Hundi, which is payable at sight, Miadi Hundi and usance bills both provide deferred payment terms for commercial transactions.
8. Which price index measures headline inflation in India?
[A] GDP Deflator
[B] WPI
[C] CPI (Combined)
[D] CPI-IW
Show Answer
Correct Answer: C [CPI (Combined)]
Notes:
In India, headline inflation for monetary policy and general price monitoring is measured using the all-India Consumer Price Index (CPI), specifically CPI (Combined). MoSPI releases CPI for Rural, Urban and Combined sectors, and inflation is usually calculated as the year-on-year change in CPI. The Reserve Bank of India uses CPI headline inflation as its main inflation indicator for policy decisions, not WPI or CPI-IW.
9. Why the Indirect taxes are termed regressive taxing mechanisms?
[A] They are charged at higher rates than direct taxes
[B] They are charged the same for all income groups
[C] They are not charged the same for all income groups
[D] ]None of the above is a correct reason
Show Answer
Correct Answer: B [They are charged the same for all income groups]
Notes:
The indirect taxes like VAT etc are paid by everyone if they buy any product irrespective of financial conditions. Direct taxing is considered the most progressive taxing mechanisms because they justify the income levels of the people
10. Consider the following economic activities:
- Outsourcing of goods production to foreign countries
- Outsourcing of services to foreign countries
- Increase in domestic tourism spending
- Increase in foreign tourist arrivals
Which of the above activities would contribute to increasing the deficit in a country's current account?
[A] Only 1
[B] Only 1 and 2
[C] 1, 2 and 3
[D] 1, 2 and 4
Show Answer
Correct Answer: B [Only 1 and 2]
Notes:
Outsourcing goods and services to foreign countries (statements 1 and 2) increases payments made abroad, thereby worsening the current account deficit. Domestic tourism spending (3) does not affect the current account, as funds remain within the economy. Increase in foreign tourist arrivals (4) actually improves the current account by bringing foreign currency into the country.
