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 fertilizer contains the highest percentage of nitrogen?
[A] Urea
[B] Ammonium nitrate
[C] Calcium nitrate
[D] Calcium ammonium nitrate
Show Answer
Correct Answer: A [Urea]
Notes:
Urea is a white crystalline solid containing about 46% nitrogen. Urea is widely used as a fertilizer and animal feed additive in agriculture. No other solid fertilizer has a higher nitrogen content than urea. Ammonium nitrate contains about 34% nitrogen, calcium ammonium nitrate about 26%, and calcium nitrate about 15.5% nitrogen.
3. Which combination can increase the deposit component of money supply?
[A] Increasing reserve requirements / decreasing volume of reserves
[B] Lowering reserve requirements / increasing volume of reserves
[C] Lowering reserve requirements / decreasing volume of reserves
[D] Increasing reserve requirements / increasing volume of reserves
Show Answer
Correct Answer: B [Lowering reserve requirements / increasing volume of reserves]
Notes:
The correct answer is “Lowering reserve requirements / increasing volume of reserves”, because lowering reserve requirements allows banks to lend a larger proportion of their deposits, thereby increasing the money multiplier, while increasing the volume of reserves gives banks more funds to create loans and deposits; together, these actions expand the deposit component of the money supply.
4. Which of the following Government gets the stamp duty collected on promissory notes?
[A] State Government 100%
[B] Central Government 100 %
[C] State Government 50% and Central Government 50%
[D] State Government 25% and Central Government 75%
Show Answer
Correct Answer: A [State Government 100%]
Notes:
The correct answer is “State Government 100%.” In India, stamp duty on promissory notes is governed by the Stamp Act of 1899, which allows state governments to levy stamp duty. Each state has the authority to set its own rates, and the revenue collected from stamp duty is retained entirely by the state government. This is a important source of revenue for states, contributing to their financial resources for development and public services.
5. Which is NOT a qualitative instrument of credit control in India?
[A] Moral Suasion
[B] Credit Rationing
[C] Cash Reserve Ratio (CRR)
[D] Margin Requirements
Show Answer
Correct Answer: C [Cash Reserve Ratio (CRR)]
Notes:
Cash Reserve Ratio (CRR) is a quantitative instrument set by the Reserve Bank of India under Section 42(1) of the RBI Act, 1934. CRR mandates banks to keep a percentage of deposits with RBI in cash. It controls the total volume of credit by affecting banks’ lending power. Qualitative credit control instruments in India include moral suasion, credit rationing, and margin requirements.
6. Consider the following tools used by central banks to influence monetary conditions:
- Reverse Repo Rate
- Cash Reserve Ratio
- Statutory Liquidity Ratio
- Bank Rate
An increase in which among the above could raise interest rates in the market?
[A] Only 1 and 2
[B] Only 1
[C] 1, 2, 3 and 4
[D] 1, 2 and 3
Show Answer
Correct Answer: C [1, 2, 3 and 4]
Notes:
An increase in any of the reverse repo rate, cash reserve ratio, statutory liquidity ratio, or bank rate reduces liquidity or increases borrowing costs for banks, leading to higher market interest rates. All four are contractionary monetary tools used by central banks to moderate inflation and control credit growth by tightening monetary conditions.
7. Which author was an investment banker before becoming a writer?
[A] Arvind Adiga
[B] Chetan Bhagat
[C] Jhumpa Lahiri
[D] Kiran Desai
Show Answer
Correct Answer: B [Chetan Bhagat]
Notes:
Chetan Bhagat worked as an investment banker at Goldman Sachs and Deutsche Bank in Hong Kong for about 11 years. He graduated from IIT Delhi in 1995 and IIM Ahmedabad in 1997. Bhagat wrote his first novel, Five Point Someone, while still an investment banker. He left banking after publishing his third novel in 2008.
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. 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.
10. With reference to various types of Banking, what is “Mixed Banking”?
[A] when banks undertake the activities of commercial and investment banking together
[B] when banks undertake the activities of wholesale and retail banking together
[C] when banks undertake the activities of offline and online banking together
[D] when banks undertake the activities of commercial and cooperative banking together
Show Answer
Correct Answer: A [when banks undertake the activities of commercial and investment banking together]
Notes:Mixed Banking is the system in which banks undertake activities of commercial and investment banking together.
- These banks give short-term and long-term loans to industrial concerns.
- The banks appoint experts which give valuable advice on various financial issues and also help gauge the financial health of companies.
- Industries don’t have to run to different places for differential financial needs.
- They thus promote rapid industrialization.
- They may however pose a grave threat to liquidity of a bank and lead to bad debts.