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 among the following is a most suitable example of double counting in national income ?
[A] Wages of bus and train drivers
[B] Cotton output and cotton cloth output
[C] Electricity output and water output
[D] Tax receipts and earnings of inland revenue officials
Show Answer
Correct Answer: B [Cotton output and cotton cloth output]
Notes:
While estimating the national income, the problem of double counting occurs when the value of some goods and services are counted more than once. Cotton output and cotton cloth output both the raw material and the final result are counted.
2. Which among the following is a term for which alternate word “Buyer’s Monopoly” is used?
[A] Oligopoly
[B] Inverse monopoly
[C] Monopsony
[D] Duopoly
Show Answer
Correct Answer: C [Monopsony]
Notes:
Monopsony refers to a market structure in which a single buyer substantially controls the market as the major purchaser of goods and services offered by many sellers.
3. In which year India launched Targeted Public Distribution System ?
[A] 1995
[B] 1996
[C] 1997
[D] 1998
Show Answer
Correct Answer: C [1997]
Notes:
The Targeted Public Distribution System (TPDS) replaced the erstwhile PDS from June 1997. Under the new system a two tier subsidized pricing system was introduced to benefit the poor.
4. Which tactic artificially inflates trading volumes to deceive retail investors in India?
[A] Dividend Stripping
[B] Intra-Day Trading
[C] Forward Trading
[D] Circular Trading
Show Answer
Correct Answer: D [Circular Trading]
Notes:
Circular trading involves participants repeatedly buying and selling the same securities within a group. This creates fake market activity without changing ownership. Circular trading is banned under SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003. SEBI monitors for such patterns using price bands and volume filters. The practice is classified as market manipulation under Indian securities law.
5. Consider the following:
- Foreign Direct Investments
- Foreign Institutional Investments
- American Depository Receipts
- Global Depository Receipts
In the context of “Sources of Foreign Exchange Reserves,” which of the above are placed under Portfolio Investment?
[A] 2, 3 and 4
[B] 1, 2 and 3
[C] 1 and 4
[D] 1 only
Show Answer
Correct Answer: A [2, 3 and 4]
Notes:
Portfolio investments comprise financial assets such as stocks, bonds, and depository receipts. Foreign Institutional Investments (FII), American Depository Receipts (ADR), and Global Depository Receipts (GDR) are all considered portfolio investments because they do not confer direct control over the underlying asset or enterprise, whereas Foreign Direct Investments involve ownership and control, and are not part of portfolio investment.
6. 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.
7. The Financial Stability Board (FSB) is mainly linked to which group of countries?
[A] BRICS Nations
[B] G-20 Countries
[C] SAARC Countries
[D] APEC Members
Show Answer
Correct Answer: B [G-20 Countries]
Notes:
The Financial Stability Board was established in 2009 after the G20 Pittsburgh Summit. It succeeded the Financial Stability Forum. The Board includes all G20 major economies, FSF members, and the European Commission. The Board is hosted by the Bank for International Settlements in Basel, Switzerland. The FSB’s formation and mandate are directly associated with the G-20 group of countries.
8. Which of the following rate is charged by banks to their most credit worthy customers?
[A] Prime Lending Rate
[B] Repo Rate
[C] Statutory Liquidity Rate
[D] Bank Rate
Show Answer
Correct Answer: A [Prime Lending Rate]
Notes:
A prime rate or prime lending rate is an interest rate used by banks, usually the interest rate at which banks lend to favoured customers—i.e., those with good credit.
9. The demand for heavy loans can lead to which situation for banks?
[A] Improved bank cost efficiency through scale economies
[B] Liquidity constraints and solvency risks for banks
[C] Reduced need for risk management systems
[D] Automatic increases in bank capital reserves
Show Answer
Correct Answer: B [Liquidity constraints and solvency risks for banks]
Notes:
Heavy loan demand can strain a bank’s available liquid assets, increasing the risk of liquidity shortfall. High loan volumes, if unmatched by equivalent growth in capital or asset quality, can adversely impact the solvency position of banks. The Basel III regulatory framework emphasizes maintenance of adequate capital buffers to absorb credit risk and liquidity shocks. Instances of aggressive loan growth have historically preceded bank distress during financial crises.
10. Which of the following targets at individuals and small businesses who lack access to conventional banking and related services?
[A] Asset Finance Company
[B] Investment Company
[C] NBFC Micro Finance Institution
[D] Infrastructure Finance Company
Show Answer
Correct Answer: C [NBFC Micro Finance Institution]
Notes:
A microfinance institution is an organization that offers financial services to low income populations. Almost all give loans to their members, and many offer insurance, deposit and other services. A great scale of organizations is regarded as microfinance institutes.
