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 economic law states “bad money drives out good money”?
[A] Wagner’s law
[B] Keynes’ law
[C] Grimm’s law
[D] Gresham’s law
Show Answer
Correct Answer: D [Gresham’s law]
Notes:
Gresham’s law, enunciated by Sir Thomas Gresham, states that inferior currency (bad money) in circulation displaces valuable or superior currency (good money) if both are accepted at same face value, as people hoard the good currency and spend the bad.
2. Which among the following would most likely follow if the Reserve Bank of India effects selling of the securities?
[A] The cash resources at the disposal of the commercial banks increase.
[B] The cash resources at the disposal of the commercial banks get diminished.
[C] The cash resources of the commercial banks remain unchanged
[D] None of the above
Show Answer
Correct Answer: B [The cash resources at the disposal of the commercial banks get diminished.]
Notes:
The Reserve Bank of India starts selling the Government Securities, on behalf of the Government. Either the commercial banks or retail investors buy the securities, resulting in decrease of cash resources at the disposal of the commercial banks.
3. In September 1999, which organization established the Poverty Reduction and Growth Facility (PRGF) to make the objectives of poverty reduction and growth more central to lending operations in its poorest member countries?
[A] Asian Development Bank
[B] International Monetary Fund
[C] World Bank
[D] US Federal Bank
Show Answer
Correct Answer: B [International Monetary Fund]
Notes:
The Poverty Reduction and Growth Facility (PRGF) was set up by the International Monetary Fund in September 1999. Its objective was to formulate policies focusing on growth and poverty reduction.
4. Which of the following organizations provides Buffer Stock Financing Facility ?
[A] Reserve Bank of India
[B] Asian Development Bank
[C] International Monetary Fund
[D] World Bank
Show Answer
Correct Answer: C [International Monetary Fund]
Notes:
IMF in 1969 to provide financial assistance to members with a temporary balance of payments need arising from contributions to buffer stocks established under approved international commodity agreements
5. Which among the following does not come under the monetary policy for regulating the economy?
[A] Discount rate
[B] Government spending
[C] reserve requirement
[D] Open market Operations
Show Answer
Correct Answer: B [Government spending]
Notes:
Government spending refers to the money spent by the government or public sector on the acquisition of goods and services such as education, healthcare, social protection, defence etc. It does not come under monetary policy.
6. Approval of which among the following is needed to draw funds from Consolidated Fund of India?
[A] President
[B] Parliament
[C] Council of Ministers
[D] All the above
Show Answer
Correct Answer: B [Parliament]
Notes:
The Consolidated Fund of India was created under Article 266 of the Indian Constitution. The government meets all its expenditure from this fund and it needs parliamentary approval to withdraw money from this fund.
7. The investment in Plant & Machinery up to which among the following amounts in India is called a Tiny Unit in India?
[A] Rs. 5 Lakh
[B] Rs. 10 Lakh
[C] Rs. 15 Lakh
[D] Rs. 25 Lakh
Show Answer
Correct Answer: D [Rs. 25 Lakh]
Notes:
A tiny unit is a business enterprise that invests less than Rs. 25 lakh in plant and machinery. This limit applies regardless of the location of the unit.
A small scale industry is an industrial undertaking that invests in plant and machinery. The investment can be held on ownership terms, on lease, or by hire purchase.
8. Which among the following economic activities would contribute in increasing the deficit in current account?
1. Outsourcing of Goods
2. Outsourcing of services
3. Increase in domestic tourism
4. Increase in foreign tourist arrival
Select the correct option from the codes given below:
[A] Only 1
[B] Only 1 & 2
[C] Only 1, 2 & 3
[D] Only 1, 2 & 4
Show Answer
Correct Answer: B [ Only 1 & 2 ]
Notes:
The correct answer is “Only 1 & 2.” 1. Outsourcing of Goods (1): This leads to an increase in imports, which negatively impacts the current account balance. 2. Outsourcing of Services (2): Similar to goods, outsourcing services results in payments to foreign entities, increasing the current account deficit. 3. Increase in Domestic Tourism (3): This does not affect the current account negatively, as it involves spending within the country. 4. Increase in Foreign Tourist Arrival (4): This positively impacts the current account by bringing in foreign currency. Trivia: The current account is a key component of a country’s balance of payments, reflecting trade in goods and services, income, and current transfers.
9. The money in the Consumer Welfare Fund primarily comes from__:
[A] Excise duty on toxic goods
[B] Money not refundable to the manufacturers
[C] Cess on consumer goods
[D] None of the above
Show Answer
Correct Answer: B [ Money not refundable to the manufacturers ]
Notes:
The Central Excise and Salt Act, 1944 was amended in 1991 to enable the Central Government to create a Consumer Welfare Fund where the money not refundable to the manufacturers, etc. is credited. Consumer Welfare Fund was created in 1992 with the objective of providing financial assistance to promote and protect the welfare of the consumer, create consumer awareness and strengthen consumer movement in the country, particularly in rural areas. The Department of Consumer Affairs operates the Fund, setup by the Department of Revenue under the Central Excise and Salt Act, 1944.
10. The basic WTO principle with reference to trade barriers is that:
[A] Trade barriers can be imposed by any country that believes it will benefit from such trade barriers
[B] Trade Barriers should be lowered equally and without discrimination for all member countries
[C] Trade Barriers can be imposed if a majority of the members of the WTO agree
[D] Trade Barriers should be the same in all member countries so that the result is equivalent to free trade
Show Answer
Correct Answer: B [ Trade Barriers should be lowered equally and without discrimination for all member countries ]
Notes:
The correct answer is that trade barriers should be lowered equally and without discrimination for all member countries. This principle is rooted in the Most-Favored-Nation (MFN) clause of the World Trade Organization (WTO), which mandates that any favorable trading terms offered to one member must be extended to all members. This aims to promote fair competition and prevent trade discrimination, fostering a more open and equitable global trading system. The WTO, established in 1995, has 164 member countries, emphasizing the importance of non-discriminatory trade practices.
