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. If India’s external commercial borrowings increase, what is the likely macroeconomic impact?
[A] External debt will increase, but macroeconomic impact depends on hedging and exchange rates
[B] External debt will increase, but forex reserves will remain unaffected
[C] External debt will remain unaffected due to RBI’s forward book management
[D] External debt will increase proportionally, with no impact on current account deficit
Show Answer
Correct Answer: A [External debt will increase, but macroeconomic impact depends on hedging and exchange rates]
Notes:
At end-March 2025, India’s outstanding commercial borrowings reached $291.6 billion, a 16.4% rise from the previous year. Increase in ECBs directly raises external debt. Macroeconomic stability varies with hedging costs and exchange rate fluctuations, which can affect inflation and liquidity. The impact is also influenced by RBI’s management of foreign exchange reserves and currency volatility, not only the debt quantum.
2. An autonomous increase in expenditure should result in an increase in a country’s real GNP only if ?
[A] The country’s balance of trade is negative
[B] The country’s economy is working under conditions of less than full employment
[C] It is government expenditure
[D] The multiplier is at least 1.5
Show Answer
Correct Answer: B [The country’s economy is working under conditions of less than full employment]
Notes:
When the economy is working under conditions of less than full employment, the GDP gap is positive and the economy operates at less than potential. At this point, an increase in expenditure would result in an increase in a country’s real GNP.
3. Which among the following is a suitable term for the state of economy in which economic activity is slowing down but wages and prices continue to rise ?
[A] Inflation
[B] Deflation
[C] Skweflation
[D] Stagflation
Show Answer
Correct Answer: D [Stagflation]
Notes:
Stagflation refers to persistent high inflation coupled with high unemployment and stagnant demand /growth in economy.
High Inflation + Low Economic Growth {or conditions of recession} + Low Employment Generation = Stagflation
4. Who among the following declared the First Industrial Policy in the Post Independence Period?
[A] Jawahar lal Nehru
[B] Syama Prasad Mookerjee
[C] Bayya Suryanarayana Murthy
[D] Rafi Ahmed Kidwai
Show Answer
Correct Answer: B [Syama Prasad Mookerjee]
Notes:
In the year 1948, India’s first Industrial Policy Resolution was adopted. This resolution defined the roles of government in development of industries in independent India. This policy determined that India would follow a mixed economy model having both public and private enterprises.
5. Which is the primary unit under the Lead Bank Scheme for banking infrastructure?
[A] Town
[B] Village
[C] District
[D] Block
Show Answer
Correct Answer: C [District]
Notes:
The Lead Bank Scheme was introduced by the Reserve Bank of India in 1969. The scheme adopted a district-based approach for banking infrastructure development. Under this scheme, each district is allocated to a commercial bank, called the Lead Bank for the district. The scheme covers all districts in India except certain metropolitan cities and Union Territories.
6. In context with the macroeconomics , Philips Curve is a relationship between the rates of ___?
[A] Unemployment & Exim trade
[B] Unemployment and Inflation
[C] Unemployment and Demand
[D] Unemployment and Poverty
Show Answer
Correct Answer: B [Unemployment and Inflation]
Notes:
Phillips curve developed by A. W. Phillips says that the inflation and unemployment have a stable and inverse relationship; which means that higher inflation is associated with lower unemployment and vice versa. However, later it was proved that this curve is applicable only in the short-run, and in long-run, inflationary policies would not decrease unemployment.
7. Consider the following statements regarding Cash Management Bills (CMBs):
- Cash Management Bills are short-term money market instruments with maturity less than 91 days.
- Cash Management Bills are issued at a discount to face value and redeemed at face value upon maturity.
- Cash Management Bills are issued by the Reserve Bank of India on behalf of the Central Government.
- Cash Management Bills follow a fixed, pre-determined issuance schedule like Treasury Bills.
Which of the above statements is / are correct?
[A] Only 1 and 2 are correct
[B] Only 1, 2, and 3 are correct
[C] All are correct
[D] Only 2 and 3 are correct
Show Answer
Correct Answer: B [Only 1, 2, and 3 are correct]
Notes:
Statements 1, 2, and 3 are correct. Cash Management Bills (CMBs) are short-term securities with maturities less than 91 days, issued at a discount and redeemed at face value, by the RBI on behalf of the Central Government. Statement 4 is incorrect; unlike Treasury Bills, CMBs are issued as per requirement, not on a fixed schedule, enabling flexible management of government cash flows.
8. Who regulates interest rates on savings bank accounts in India?
[A] Not regulated
[B] Regulated by Central Government
[C] Regulated by RBI
[D] Regulated by State Governments
Show Answer
Correct Answer: C [Regulated by RBI]
Notes:
Reserve Bank of India (RBI) regulates savings bank account interest rates. Since October 2011, RBI deregulated these rates, letting banks set their own rates but still directing certain calculation and crediting methods. RBI issues guidelines for frequency of interest payments and storage of balances. RBI operates under the Reserve Bank of India Act, 1934 and directions updated periodically for banking operations.
9. Which is the oldest public sector bank in India?
[A] Punjab National Bank
[B] Imperial Bank of India
[C] Allahabad Bank
[D] Central Bank of India
Show Answer
Correct Answer: C [Allahabad Bank]
Notes:
Allahabad Bank was founded in 1865 in Allahabad. It was nationalized by the Government of India in 1969. The bank’s operations merged with Indian Bank in April 2020. Punjab National Bank started in 1894, Central Bank of India in 1911, and Imperial Bank of India was set up in 1921. Allahabad Bank operated for 155 years until its amalgamation.
10. What does the labour force participation rate measure?
[A] The persons who are either employed or actively seeking work
[B] The persons who are employed only
[C] The persons capable to work but not seeking employment
[D] None of them
Show Answer
Correct Answer: A [The persons who are either employed or actively seeking work]
Notes:
The labour force participation rate measures the proportion of the working-age population that is either employed or actively seeking employment. It is calculated as the percentage of people aged 15 or above who are either working or looking for work. It does not include persons not actively searching for jobs. The rate is published by the Ministry of Labour and Employment in India.
