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. Where do the Commercial Banks keep the liquid assets under the Statutory Liquidity Ratio?
[A] With RBI
[B] With other banks
[C] In the Market
[D] With Themselves
Show Answer
Correct Answer: D [With Themselves]
Notes:
Banks in India are required to maintain a specified minimum Statutory Liquidity Ratio (SLR) of their net demand and time liabilities in the form of liquid assets like cash, gold or approved securities. The liquid assets under SLR are kept by the banks themselves in their own custody.
2. Which among the following defines ‘currency depreciation” of a currency?
[A] Fall in the exchange rate of one currency in terms of other currencies
[B] Fall in the exchange rate of other currencies in terms of one currencies
[C] Decrease in the volume of a particular currency
[D] Increase in the exchange rate of a currency
Show Answer
Correct Answer: A [Fall in the exchange rate of one currency in terms of other currencies]
Notes:
Currency depreciation is the loss of value of a country’s currency with respect to one or more foreign reference currencies. This is a term used in floating exchange rate system, where the exchange rates of a currency are market driven and not fixed by the country’s central bank.
3. Which among the following is referred to as the “Soft Loan Window” of the World Bank?
[A] International Monetary Fund
[B] International Finance Corporation
[C] International Development Association
[D] World Trade Organization
Show Answer
Correct Answer: C [International Development Association]
Notes:
The “Soft Loan Window” of the World Bank is commonly referred to as the International Development Association (IDA). It was founded in 1960 and provides low or zero-interest loans and grants to the world’s poorest countries. These “soft” loan terms allow for improved economic development and poverty reduction. Unlike the World Bank, the IDA seeks to reduce poverty by providing loans to developing countries for programs that are intended to boost economic growth and improve living conditions.
4. Which of the following statements best describes a progressive tax system?
[A] The tax rate decreases as the taxable amount increases
[B] The tax rate stays the same regardless of the taxable amount
[C] The tax rate increases as the taxable amount increases
[D] The tax rate is randomly determined
Show Answer
Correct Answer: C [The tax rate increases as the taxable amount increases]
Notes:
In a progressive tax system, higher income earners pay a higher tax rate compared to those who earn less. This is based on the assumption that individuals who earn more have the ability and the capacity to pay more taxes. Most income tax systems in the world are progressive, including the United States, Canada, and the United Kingdom.
5. To avoid a Prompt Coercive Action from the Reserve Bank of India, a bank should not fall in which of the following conditions?
[A] It should have a very high NPA
[B] It should have a very low NPA
[C] It should have high capital adequacy Ratio
[D] It should have high profits
Show Answer
Correct Answer: A [It should have a very high NPA]
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.
6. For the first time in India, in which of the following Budgets “basic reforms in the international financial and trading system ” was stressed in India?
[A] 1969
[B] 1980
[C] 1983
[D] 1984
Show Answer
Correct Answer: C [1983]
Notes:
In the 1983 Budget, Finance Minister R. Venkataraman emphasized “basic reforms in the international financial and trading system” for the first time in India. This was a pivotal moment as it marked a shift towards liberalization and modernization of India’s economy, laying the groundwork for future reforms in the 1990s. The 1983 Budget aimed to address economic challenges and improve India’s global trade position.
7. Which among the following rates play most important role in sucking out the liquidity in the system?
[A] Repo Rate
[B] Cash Reserve Ratio
[C] Prime Lending Rate
[D] BPLR
Show Answer
Correct Answer: B [Cash Reserve Ratio]
Notes:
Some of the major tools to suck the excess liquidity out of the system standing deposit facility (SDF), narrowing the liquidity adjustment facility (LAF), increase repo rate, cash reserve ratio etc.
8. Which among the following is the oldest Public Sector Bank of India?
[A] Punjab National Bank
[B]
Imperial Bank of India
[C] Allahabad Bank
[D] Central Bank of India
Show Answer
Correct Answer: C [Allahabad Bank]
Notes:
The oldest Public Sector Bank in India is Allahabad Bank, established in 1865. It was nationalized in 1969, making it one of the first banks to be included in the public sector. Punjab National Bank was founded in 1894, Imperial Bank of India (now part of State Bank of India) was established in 1921, and Central Bank of India was founded in 1911.
9. The business transactions done in lieu of which of the following would be called Invisible Trade?
- Consulting
- Income from foreign investment
- Shipping services
- Tourism
Select the correct option from the codes given below:
[A] Only 1 & 2
[B] Only 2 & 3
[C] Only 3 & 4
[D] 1, 2, 3 & 4
Show Answer
Correct Answer: D [ 1, 2, 3 & 4 ]
Notes:
Business transactions that occur with no exchange of tangible goods called Invisible Trade. It involves the transfer of non-tangible goods and/or service, intellectual property and patents. Examples of invisible trade including consulting, income from foreign investment, shipping services and tourism.
10. The expenditure done by the government on the MGNREGA scheme comes under the:
1. Revenue expenditure
2. Capital Expenditure
3. Planned Expenditure
4. Non Planned expenditure
Choose the correct option from the codes given below:
[A] Only 1 & 3
[B] Only 1, 2 & 3
[C] Only 1 & 4
[D] Only 1, 2 & 4
Show Answer
Correct Answer: B [ Only 1, 2 & 3 ]
Notes:
There are two different sets of classifications ‘revenue vs capital expenditure’ and ‘ plan vs non-plan.’
In general, expenditure used to create assets (building a road for instance) is capital expenditure while revenue expenditure consists of expenses such as salaries and other administrative costs. Plan expenditure covers money spent on schemes or projects run by different ministries under the five-year plans.
Schemes Such as the MG National Rural Employment Guarantee Scheme can have both revenue and capital components. For instance, the administrative costs of a plan scheme could be classified as revenue expenditure while the expenditure on the scheme itself (e.g. building a village road) might be capital expenditure. Non-plan expenditure consists of any expenditure by the government not covered by the five year plans. These include interest payments on government debt and expenditure on organs of the state such as the judiciary and the police.
