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 state led sugarcane production in India in 2023–24?
[A] Uttar Pradesh
[B] Maharashtra
[C] Tamil Nadu
[D] Andhra Pradesh
Show Answer
Correct Answer: A [Uttar Pradesh]
Notes:
Uttar Pradesh contributed over 40% of India’s sugarcane output in the 2023–24 season, with an estimated 220–230 million tonnes. The state consistently leads sugarcane production due to fertile alluvial soil, reliable irrigation from the Ganga basin, and a favorable subtropical climate. Maharashtra ranked second with about 95–100 million tonnes. Data is consistent with figures up to 2024 estimates.
2. Which among the following ratios correctly denotes Money Multiplier?
[A] M3: M0
[B] M1: M3
[C] M3: M1
[D] M1: M0
Show Answer
Correct Answer: A [M3: M0]
Notes:
Money multiplier is expressed as a ratio between broad money (M3) and Reserve money (M0). It refers to how an initial deposit can lead to a bigger final increase in the total money supply.
3. In which Five Year Plan was the Khadi and Village Industries Commission launched?
[A] First
[B] Second
[C] Third
[D] Fourth
Show Answer
Correct Answer: B [Second]
Notes:
The Khadi and Village Industries Commission was established in April 1957 during the Second Five Year Plan. It assumed the functions of the former All India Khadi and Village Industries Board. The commission operates as a statutory body under the Ministry of Micro, Small and Medium Enterprises, Government of India. Its objectives include promoting and developing khadi and village industries in rural areas.
4. If the people prefer to keep cash with them rather than deposits, which among the following impacts will be seen on the Money Supply of the country?
[A] The money supply of the country will increase
[B] The money supply of the country will decrease
[C] The money supply of the country will not change
[D] The money supply of the country may increase or decrease
Show Answer
Correct Answer: B [The money supply of the country will decrease]
Notes:
If people prefer to keep cash with them rather than making deposits in banks, the impact on the Money Supply of the country will be as follows:
[B] The money supply of the country will decrease.
The reason for this is that money supply is typically categorized into different measures, with M1 and M2 being common examples. M1 includes currency (physical cash) in circulation and demand deposits (checking accounts). When people hold more cash and make fewer deposits, it reduces the amount of money in demand deposits, which are considered a part of the money supply. Therefore, if people choose to keep more cash on hand, it reduces the overall money supply in the country, leading to a decrease.
5. Which of the following took birth from the Marrakech Agreement?
[A] World Economic Forum
[B] World Trade organization
[C] OPEC
[D] G-20
Show Answer
Correct Answer: B [World Trade organization]
Notes:
The Marrakesh Agreement, manifested by the Marrakesh Declaration, was an agreement signed in Marrakesh, Morocco, by 123 nations on 15 April 1994, marking the culmination of the 8-year-long Uruguay Round and establishing the World Trade Organization, which officially came into being on 1 January 1995.
6. Consider the following:
- Allotting of the shares of net proceeds of taxes
- Laying down principles governing grants in aid
- Looking into the financial relations between the central government and the state Governments
The above mentioned functions are carried out by which among the following?
[A] Cabinet Committee on Economic Affairs
[B] National Development Council
[C] Finance Commission
[D] NITI Aayog
Show Answer
Correct Answer: C [Finance Commission]
Notes:
The correct answer is the Finance Commission. The Finance Commission is a constitutional body established under Article 280 of the Indian Constitution. Its primary role is to recommend the distribution of tax revenues between the central and state governments, ensuring fiscal federalism. It also lays down principles for grants-in-aid to states, addressing financial relations between different levels of government. The Finance Commission is constituted every five years, and its recommendations are crucial for maintaining balanced economic development across states.
7. Consider the following tools used by central banks to influence monetary conditions:
- Reverse Repo Rate
- Cash Reserve Ratio
- Statutory Liquidity Ratio
- Bank Rate
An increase in which among the above could raise interest rates in the market?
[A] Only 1 and 2
[B] Only 1
[C] 1, 2, 3 and 4
[D] 1, 2 and 3
Show Answer
Correct Answer: C [1, 2, 3 and 4]
Notes:
An increase in any of the reverse repo rate, cash reserve ratio, statutory liquidity ratio, or bank rate reduces liquidity or increases borrowing costs for banks, leading to higher market interest rates. All four are contractionary monetary tools used by central banks to moderate inflation and control credit growth by tightening monetary conditions.
8. What is the investment limit for a micro enterprise under MSME classification in India?
[A] Rs. 1 crore
[B] Rs. 5 crore
[C] Rs. 10 crore
[D] Rs. 25 crore
Show Answer
Correct Answer: A [Rs. 1 crore]
Notes:
Government notification S.O.1702(E) dated June 1, 2020 defines a micro enterprise as one with investment in plant and machinery or equipment not exceeding Rs. 1 crore and annual turnover not exceeding Rs. 5 crore under the current MSME classification. This threshold replaced the previous limit for tiny enterprises, which was below Rs. 25 lakh, as per MSME Development Act, 2006 amendments.
9. Which is NOT an anti-inflationary measure by the central bank?
[A] Raising the Bank Rates
[B] Raising Reserve Ratio Requirements
[C] Rationing of Credit
[D] Purchase of securities in Open Markets
Show Answer
Correct Answer: D [Purchase of securities in Open Markets]
Notes:
The Reserve Bank of India purchases government securities in open market operations to increase liquidity in the banking system. Increased liquidity leads to higher money supply in the economy. Higher money supply may lower interest rates and promote borrowing. This process is utilized to support economic growth and is considered an expansionary monetary policy. Open market purchase of securities is not used to control inflation.
10. Consider the following economic activities:
- Outsourcing of goods production to foreign countries
- Outsourcing of services to foreign countries
- Increase in domestic tourism spending
- Increase in foreign tourist arrivals
Which of the above activities would contribute to increasing the deficit in a country's current account?
[A] Only 1
[B] Only 1 and 2
[C] 1, 2 and 3
[D] 1, 2 and 4
Show Answer
Correct Answer: B [Only 1 and 2]
Notes:
Outsourcing goods and services to foreign countries (statements 1 and 2) increases payments made abroad, thereby worsening the current account deficit. Domestic tourism spending (3) does not affect the current account, as funds remain within the economy. Increase in foreign tourist arrivals (4) actually improves the current account by bringing foreign currency into the country.
