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. What is the number of members in the Monetary Policy Committee (MPC)?
[A] 4
[B] 5
[C] 6
[D] 7
Show Answer
Correct Answer: C [ 6 ]
Notes:
Monetary Policy Committee (MPC) committee comprises six members – three officials of the Reserve Bank of India and three external members nominated by the Government of India.
2. Who among the following is called father of Economics?
[A] David Hume
[B] Lamarck
[C] Adam Smith
[D] John Stuart Mill
Show Answer
Correct Answer: C [Adam Smith]
Notes:
Adam smith is considered as father of Modern Economics. In his book “The nature & causes of wealth of the Nation’s 1776, he has described economics as science of wealth. According to him economy is the study of wealth only and it deals with its production and consumption. Only material goods which are scarce and useful are wealth.
3. What is the relationship between ‘Dear money’ & ‘Cheap money’ in Economics Terminology?
[A] Both of the terms are synonyms
[B] Both of them are antonyms
[C] They are unrelated in terms of their meaning
[D] Dear Money is white Money , cheap money is black money
Show Answer
Correct Answer: B [Both of them are antonyms]
Notes:
Dear money is available at exceptionally high rate of interest and cheap money is available at very low rates
4. Which Indian state is the top producer of large cardamom?
[A] Kerala
[B] Sikkim
[C] Assam
[D] Gujarat
Show Answer
Correct Answer: B [Sikkim]
Notes:
Sikkim produces about 80% of India’s large cardamom. It is grown mainly in the Himalayan region of Sikkim due to the favorable climate and altitude. Sikkim’s production reached approximately 5.591 thousand tonnes in 2025. The government initiative “Mero Alaichi, Mero Dhan” supports cardamom cultivation in Sikkim. Assam, Gujarat, and Kerala do not match Sikkim’s output in this crop.
5. Which currency did Keynes propose for global trade from 1940 to 1942?
[A] The Whuffie system managed by the International Trade Organization
[B] The Unitas managed by the World Monetary Authority
[C] The Bancor managed by the International Clearing Union
[D] The Terra managed by the Global Central Bank
Show Answer
Correct Answer: C [The Bancor managed by the International Clearing Union]
Notes:
Keynes and E. F. Schumacher proposed the Bancor as a supranational currency between 1940–1942. The International Clearing Union was suggested to manage its use in global trade. The Bancor proposal was presented by the United Kingdom at the Bretton Woods Conference in 1944. The concept was intended to prevent persistent surpluses or deficits among countries. The Bancor was not adopted; instead, the U.S. dollar was chosen as the main reserve currency.
6. What happens to bank product prices during an inflationary trend?
[A] Increasing Trend
[B] Decreasing Trend
[C] Constant Trend
[D] No clear trend
Show Answer
Correct Answer: A [Increasing Trend]
Notes:
During inflation, central banks often raise policy rates, causing banks to increase loan and deposit rates. Higher inflation causes nominal lending and deposit rates to be repriced upwards. In 2023, the Reserve Bank of India increased repo rates in response to inflation, leading to higher lending rates in the Indian banking sector.
7. Consider the following statements:
- The Market Stabilization Scheme provides for issue of Treasury Bills and/or dated securities by the Government in addition to their normal market borrowing programme up to an annual aggregate ceiling.
- The money raised in Market Stabilization Fund is kept in the MSS Account as a part of Consolidated Fund of India
- The auditing of the MSS Fund is done by Comptroller and Auditor General of India
Which among the above statements is / are correct?
[A] Only 1 is correct
[B] Only 1 & 2 are correct
[C] 1, 2 & 3 are correct
[D] Only 1 & 3 are correct
Show Answer
Correct Answer: A [Only 1 is correct]
Notes:
The correct answer is “Only 1 is correct.” Explanation: 1. The Market Stabilization Scheme (MSS) allows the government to issue Treasury Bills and dated securities to manage liquidity, but it does not involve a separate borrowing program beyond the normal limits. 2. The money raised under the MSS is not kept in the MSS Account as part of the Consolidated Fund of India. instead, it is maintained in a separate account. 3. While the Comptroller and Auditor General of India (CAG) audits government accounts, the MSS Fund itself is not specifically audited by the CAG. Trivia Fact: The MSS was introduced in 2004 to help the Reserve Bank of India manage excess liquidity in the economy, particularly during periods of high capital inflows.
8. Consider the following statements regarding Exchange Earners’ Foreign Currency (EEFC) Accounts:
- They are opened with the Reserve Bank of India (RBI)
- They earn interest on deposits
- They need a minimum balance to be maintained by the account holder
- They are non-interest bearing current accounts opened with authorized dealer banks
Which of the above statements is / are correct?
[A] Only 1
[B] 1 and 2
[C] Only 4
[D] 2 and 3
Show Answer
Correct Answer: C [Only 4]
Notes:
EEFC accounts are non-interest bearing current accounts maintained by authorized dealer (Category-I) banks following RBI regulations. These do not earn interest and require no minimum balance. Such accounts are not held directly with RBI but through authorized dealers. Therefore, only statement 4 is correct as per current RBI rules.
9. With reference to the terms Deflation and Disinflation, which among the following statements is / are correct?
- Deflation is negative inflation, Disinflation is negative inflation growth
- Deflation increases the real value of money, Disinflation has no impact on value of money
Select the correct option from the codes given below:
[A] Only 1 is correct
[B] Only 2 is correct
[C] Both 1 & 2 are correct
[D] Neither 1 nor 2 is correct
Show Answer
Correct Answer: A [ Only 1 is correct ]
Notes:
In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). This should not be confused with disinflation, a slow-down in the inflation rate (i.e. when inflation declines to lower levels) Inflation reduces the real value of money over time; conversely, deflation increases the real value of money – the currency of a national or regional economy. This allows one to buy more goods with the same amount of money over time.
10. What must foreign banks do if they miss priority sector lending targets in India?
[A] Deposit shortfall in RIDF
[B] Deposit shortfall with NABARD
[C] Deposit shortfall with RBI
[D] Deposit shortfall with SIDBI for one year
Show Answer
Correct Answer: D [Deposit shortfall with SIDBI for one year]
Notes:
Foreign banks in India failing to meet priority sector lending targets must deposit the shortfall with SIDBI for one year as per RBI guidelines. Domestic banks deposit shortfalls in the Rural Infrastructure Development Fund under NABARD. The RBI’s 2020 guidelines specify a 40 percent lending target for foreign banks with 20 or more branches in India, based on their Adjusted Net Bank Credit.
