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 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.
2. Which among the following measures for controlling inflation can be taken by the Reserve Bank of India but not by the Government of India?
[A] Implementing progressive taxation policies
[B] Adjusting public sector expenditure budgets
[C] Credit rationing to limit money supply
[D] Regulating foreign direct investment flows
Show Answer
Correct Answer: C [Credit rationing to limit money supply]
Notes:
The Reserve Bank of India can use credit rationing to limit money supply. Credit rationing is a monetary policy tool of RBI. Progressive taxation and public sector expenditure are managed by the Government of India as fiscal policy. Regulation of foreign direct investment flows is also executed by the government. RBI and government use separate policy instruments for inflation control.
3. Which among the following is used for a situation of “Too much money chasing too few goods?
[A] Demand Pull Inflation
[B] Cost pull inflation
[C] Stagflation
[D] Hyperinflation
Show Answer
Correct Answer: A [Demand Pull Inflation]
Notes:
Demand-pull inflation refers to the inflation from rapid growth in aggregate demand and when excess demand causes ‘too much money chasing too few goods.’ This generally happens when an economy is growing at a faster rate.
4. Which among the following agency is responsible for enforcement of Foreign Exchange Management Act 1999 and Prevention of money Laundering Act 2002 in India?
[A] Reserve Bank of India
[B] Department of Revenue
[C] Enforcement Directorate
[D] Income Tax Department
Show Answer
Correct Answer: C [Enforcement Directorate]
5. Inflation Indexed Bonds is pegged to ___?
[A] WPI
[B] CPI
[C] Both WPI and CPI
[D] None of the above
Show Answer
Correct Answer: A [WPI]
Notes:
Inflation Indexed Bonds (IIBs) are pegged to the Consumer Price Index (CPI). This means their interest payments and principal value adjust based on changes in the CPI, which measures the average change over time in the prices paid by consumers for goods and services. IIBs aim to protect investors from inflation, ensuring that the purchasing power of their returns is maintained. In India, the CPI is the primary measure for these bonds, while the Wholesale Price Index (WPI) measures price changes at the wholesale level and is not used for IIBs.
6. 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.
7. What is India’s current global ranking in cotton production?
[A] First
[B] Second
[C] Third
[D] Fourth
Show Answer
Correct Answer: B [Second]
Notes:
In 2025, India ranks second worldwide in cotton production, producing about 5.1 million tonnes. China ranks first with 7.5 million tonnes. India accounts for 20% of world cotton production and leads in total cotton cultivation area, covering 38% of the world’s cotton-growing land. The expected output for 2025-26 in India is around 23.5-24.5 million bales.
8. In which of the following market forms a firm does not exercise control over price?
[A] Monopoly
[B] Mixed Competition
[C] Perfect competition
[D] Oligopoly
Show Answer
Correct Answer: C [Perfect competition]
Notes:
In economics, specifically general equilibrium theory, a perfect market is defined by several idealizing conditions, collectively called perfect competition.
9. Which of the following is an alternative way of representing the production function?
[A] Average Product
[B] The Long Run
[C] Isoquant
[D] The Short Run
Show Answer
Correct Answer: C [Isoquant]
Notes:
An isoquant is a firm’s counterpart of the consumer’s indifference curve. An isoquant is a curve that shows all the combinations of inputs that yield the same level of output. ‘Iso’ means equal and ‘quant’ means quantity.
10. Which is a primary cause of inflation?
[A] Increase in money supply
[B] Fall in production
[C] Increase in money supply and fall in production
[D] Decrease in money supply and rise in production
Show Answer
Correct Answer: C [Increase in money supply and fall in production]
Notes:
Inflation is caused by an increase in the money supply and a decrease in production. Demand-pull inflation arises when the growth in money supply surpasses economic output. Cost-push inflation occurs with supply shocks or reduced production. Both factors together can increase the general price level. India has experienced inflation due to these sources in multiple years.
