Indian Economy MCQs

Notes:
Money market securities are debt issues with maturities of one year or less. Treasury Bills, Certificate of Deposit as well as Commercial papers are money market instruments.

Notes:
David Ricardo, an English classical economist, developed the law of rent in 1809. He presented the law in his book On the Principles of Political Economy and Taxation in 1821.
Ricardo’s theory defined rent as the portion of the earth’s produce that is paid to the landlord for the original and indestructible powers of the soil. In other words, rent is the price paid for the use of land.
Ricardo developed his theory to explain the origin and nature of economic rent. He used the economy and rent to analyze the large rise in corn and land prices during the Napoleonic wars (1805-1815).
The term “Ricardian rent” comes from Ricardo’s theory.

Notes:
please note bank functions as an agent or agency when it buys or sells securities on behalf of the customer or collects and makes payment on behalf of the customer

Notes:
A Green Field Investment refers to investing in a new project or facility on undeveloped land, where no previous structures exist. This contrasts with Brown Field Investments, which involve redeveloping or upgrading existing facilities. The correct answer, “Investment made by a company in a new factory complex in a remote land of the country where there were no facilities,” exemplifies this concept, as it involves building from the ground up in an untouched area. Green Field Investments are often associated with higher risks but can lead to important long-term benefits, such as job creation and economic development.

Notes:
The sector contributing the most to India’s Gross Domestic Product (GDP) is the Tertiary sector, also known as the Services sector. In the fiscal year 2023-24, the Services sector accounted for approximately 54.7% of India’s Gross Value Added (GVA) at current prices. The contributions of the other sectors during the same period were:

• Agriculture and allied sectors (Primary sector):7%
• Industry (Secondary sector):6%

Notes:
A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand or at a set time. Among the options: 1. Airway Bill: Not a negotiable instrument. it serves as a receipt for goods and a contract of carriage. 2. Bank Note: A negotiable instrument. it represents a promise to pay the bearer a specific amount. 3. Letter of Credit: Not a negotiable instrument. it is a financial document issued by a bank guaranteeing payment. 4. Demand Draft: A negotiable instrument. it is an order to pay a specific amount on demand. Thus, the correct answer is Demand Draft.

Notes:
Please note the 3 trigger points that invite RBI to take Prompt Coercive Actions against Banks. They are low capital adequacy ratio, high non performing assets and low profit.

Notes:
Portfolio investments typically include Foreign Institutional Investments (FII) and American Depository Receipts (ADRs). FIIs are investments made by foreign entities in domestic financial markets, while ADRs represent shares of foreign companies traded on U.S. exchanges. Foreign Direct Investments (FDI) involve direct investment in physical assets, and Global Depository Receipts (GDRs) are similar to ADRs but can be issued in multiple countries. Thus, the correct answer is 2 (Foreign Institutional Investments and American Depository Receipts).

Notes:
Chetan Bhagat, the correct answer, worked as an investment banker at Deutsche Bank before becoming a bestselling author and columnist. His debut novel, “Five Point Someone,” published in 2004, gained immense popularity and was adapted into a successful Bollywood film. Bhagat’s writing often addresses contemporary issues faced by Indian youth, making him a prominent figure in Indian literature.

Notes:
The correct answer is Foreign Portfolio Investment (FPI). FPI is considered the most volatile form of foreign capital because it involves investments in financial assets like stocks and bonds, which can be quickly bought or sold. Unlike Foreign Direct Investment (FDI), which is typically long-term and involves direct ownership in businesses, FPI can fluctuate rapidly based on market conditions and investor sentiment. For instance, during economic uncertainty, FPI can exit markets swiftly, leading to important capital flight. In contrast, FDI and loans from international financial institutions tend to be more stable and long-term commitments.