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. The Core inflation is different from the general inflation because of the following?
[A] Core Inflation is caused by the supply Shock in certain essential commodities
[B] Core Inflation is the sudden increase in certain items of food grains
[C] Core Inflation is the inflation rate of a particular basket of commodities
[D] Core Inflation is just a misnomer
Show Answer
Correct Answer: C [Core Inflation is the inflation rate of a particular basket of commodities]
Notes:
Core Inflation is the rate of inflation calculated to exclude certain items that are subject to sudden and short-lived price movements, mainly food and energy. Core inflation is considered a better indicator of overall long-term than un-adjusted headline inflation.
2. First state in India to launch a policy to establish Special Agriculture Zones (SAZs):
[A] Uttar Pradesh
[B] Gujarat
[C] Haryana
[D] Uttarakhand
Show Answer
Correct Answer: D [Uttarakhand]
Notes:
Uttarakhand was the first state to set up Special Agricultural Zones (SAZs) in 2011. It was launched on the lines of the Special Economic Zones (SEZs). It encouraged the farmers to develop high-quality crop seeds typical to hilly regions.
3. Which is the opposite activity of hedging in financial markets?
[A] Arbitrage
[B] Speculation
[C] Spread
[D] Short selling
Show Answer
Correct Answer: B [Speculation]
Notes:
Speculation involves taking positions to profit from expected price changes, accepting risk for potential gain. Hedging uses opposite positions to reduce price risk, while speculation increases risk exposure for possible reward. Both activities occur in securities, currency, and futures markets. Speculators provide market liquidity by accepting risk. Regulators monitor speculative activities to maintain market stability.
4. What is it called when government prints money to cover budget gaps?
[A] Fiscal Deficit
[B] Fiscal Stimulation
[C] Deficit Financing
[D] Differential Accumulation
Show Answer
Correct Answer: C [Deficit Financing]
Notes:
Deficit financing refers to the government covering the shortfall between expenditure and revenue by printing new currency or borrowing. This process has been used in various countries during budget deficits. Printing money to cover deficits can lead to increased money supply and may contribute to inflation. Deficit financing does not refer to the deficit itself but to the method used to address the gap.
5. Which of the following Acts mandates the Ministry of Finance to present reports on budgetary trends to Parliament?
- Constitution of India
- Finance Acts of every year
- Fiscal Responsibility and Budget Management Act, 2003
- Order of President of India
Select the correct option from the codes given below:
[A] Only 1 & 2
[B] Only 3
[C] Only 2 & 3
[D] 1, 2 & 4
Show Answer
Correct Answer: B [Only 3]
Notes:
The Fiscal Responsibility and Budget Management Act, 2003 specifically mandates, under Section 7(1), periodic reporting by the Finance Ministry to Parliament on budget receipts and expenditures. The Constitution of India and the Finance Acts do not impose this requirement, nor does an Order of President make such reporting statutory for the Ministry of Finance.
6. Economic growth is normally coupled with?
[A] Inflation
[B] Hyper Inflation
[C] Deflation
[D] Stagflation
Show Answer
Correct Answer: A [Inflation]
Notes:
Economic growth results in higher disposable income available with the consumers which increases the overall demand along with the supply available for the consumers. This increase in demand spurs inflation, which eventually becomes a necessary evil for a growing economy.
7. Consider the following statements regarding the “PRASHAD” scheme:
[A] It focuses on the development and rejuvenation of identified pilgrimage destinations and heritage cities.
[B] Under the scheme, the Ministry of Tourism provides Central Financial Assistance (CFA) to State Governments/Union Territory Administrations for tourism projects.
[C] As per the latest available data, 54 projects have been sanctioned under the scheme across 28 States/UTs.
[D] 1, 2 and 3
Show Answer
Correct Answer: D [1, 2 and 3]
Notes:
PRASHAD stands for Pilgrimage Rejuvenation and Spiritual, Heritage Augmentation Drive. It is a Central Sector scheme of the Ministry of Tourism that supports the development of pilgrimage and heritage destinations through financial assistance to States and Union Territories. The Ministry’s latest reported figures show 54 sanctioned projects across 28 States/UTs. Hence, all three statements are correct.
8. Which method allows central banks to inject money when rates are near zero?
[A] Open Market Operation
[B] Reverse Repo
[C] Quantitative Easing
[D] Repo
Show Answer
Correct Answer: C [Quantitative Easing]
Notes:
Quantitative Easing is a monetary policy used by central banks to buy government securities or other securities from the market to increase money supply and encourage lending and investment. This policy is usually deployed when interest rates are close to zero and conventional monetary policy becomes ineffective. Quantitative Easing was used by the US Federal Reserve in 2008 and by the European Central Bank in 2015.
9. In which city was India’s first successful modern cotton mill established?
[A] Hyderabad
[B] Madras
[C] Bombay
[D] Calcutta
Show Answer
Correct Answer: C [Bombay]
Notes:
India’s first cotton mill was set up at Fort Gloster near Calcutta in 1818, but it did not succeed. The first successful modern cotton mill was established in Bombay in 1854 by Cowasji Nanabhai Davar. Bombay later emerged as the leading centre of the Indian cotton textile industry.
10. Which of the following operations are undertaken by Small Finance Banks?
[A] Accepting Deposits
[B] Disbursing small loans
[C] Sell Insurance Products
[D] All of the above
Show Answer
Correct Answer: D [All of the above]
Notes:
The Small Finance Banks can accept deposits and lend to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities. It can also distribute mutual fund units, insurance products, pension products, etc. with the prior approval of the RBI.
