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. Interest rate risk falls under which risk category?
[A] Credit risk
[B] Liquidity risk
[C] Market risk
[D] Operational risk
Show Answer
Correct Answer: C [Market risk]
Notes:
Interest rate risk refers to potential losses from fluctuations in interest rates. It is classified as a type of market risk. Changes in interest rates can directly impact the value of securities such as bonds. Market risk includes other elements such as equity risk and currency risk and is distinguished from credit risk, liquidity risk, or operational risk.
2. 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.
3. Who was the first Indian Governor of Reserve Bank of India?
[A] First Indian to establish a Bank in India
[B] First Indian to be chairman of State Bank of India
[C] First Indian to be governor of the Reserve Bank of India (RBI)
[D] Pioneer in Indian Commercial Banking
Show Answer
Correct Answer: C [First Indian to be governor of the Reserve Bank of India (RBI)]
Notes:
Sir Chintaman Dwarkanath Deshmukh became the first Indian Governor of RBI in 1943. He served as Governor until 1949. He was also awarded the Bharat Ratna in 1959. RBI was established in 1935 and originally had British Governors until Deshmukh’s appointment. Deshmukh later became the Finance Minister of India from 1950 to 1956.
4. What is dematerialization of securities in financial markets?
[A] The shortening of debt repayment periods on bonds
[B] Repurchase of outstanding shares by a company
[C] Conversion of physical share certificates into electronic format
[D] Prevention of share prices from falling below a minimum
Show Answer
Correct Answer: C [Conversion of physical share certificates into electronic format]
Notes:
Dematerialization converts physical securities into electronic format held in demat accounts. In India, this process is regulated by SEBI. Compulsory dematerialization for listed companies began in 1996 and for private companies from October 27, 2023. Investors must open demat accounts with SEBI-registered Depository Participants. Dematerialization reduces risks related to theft and forgery and enables faster settlements.
5. The term “cartelization” is mainly linked with which of the following groups?
[A] Small traders in local markets
[B] Independent firms formally agreeing to cooperate
[C] Individual investors in competitive markets
[D] Government-regulated monopolies
Show Answer
Correct Answer: B [Independent firms formally agreeing to cooperate]
Notes:
Cartelization describes independent firms entering formal agreements to control prices, limit supply, or divide markets. It typically involves actions such as price fixing or market-sharing. Cartelization is prohibited under the Competition Act, 2002 in India. In 2022, India’s Competition Commission imposed penalties on cement companies for cartelization. Cartels are illegal in many countries and are monitored by regulatory bodies to ensure market competition.
6. Which among the following is the chief characteristic of the primary industry of the developed countries?
[A] Larger farm size and increasing corporate ownership of farms
[B] Larger farm size and more government ownership of farms
[C] Smaller farm size and a diversity of crops on each farm
[D] Smaller farm size and fewer family-owned farms
Show Answer
Correct Answer: A [Larger farm size and increasing corporate ownership of farms]
Notes:
Consider agriculture in the developed countries such as United States and Canada. There, the small family farms are not able to earn a profit and are being replaced by large corporate farms.
7. What is the current global total fertility rate compared to replacement-level fertility?
[A] The global rate is 2.25, above the replacement level of 2.1
[B] The global rate is 2.3, below the replacement level of 2.5
[C] The global rate is below replacement level of 2.2 as of 2023
[D] The global rate is 2.52, matching replacement level
Show Answer
Correct Answer: A [The global rate is 2.25, above the replacement level of 2.1]
Notes:
The global fertility rate was about 2.25 births per woman in 2023. Replacement-level fertility is 2.1 children per woman for most countries. Global fertility was above 5 in the 1960s. United Nations demographic reports use 2.1 as the replacement threshold. Fertility rates have been consistently declining worldwide in recent decades. Population projections show this rate may drop below replacement by 2100.
8. Consider the following statements:
- Stocks offer higher average returns than bonds and other fixed-income investments, but with correspondingly higher volatility and risk.
- Stock prices are primarily governed by supply and demand, with earnings being the most important influencing factor.
Which of the above statements is/are correct?
[A] Both 1 and 2
[B] Only 1
[C] Only 2
[D] Neither 1 nor 2
Show Answer
Correct Answer: A [Both 1 and 2]
Notes:
Both statements are correct. Historically, stocks have yielded higher average returns than bonds, but with greater short-term volatility and risk. Stock prices move according to supply and demand dynamics, but corporate earnings are widely recognized as the most significant fundamental factor driving these price changes and influencing investor sentiment and market pricing.
9. Consider the following statements regarding the classification of government expenditure in India prior to 2017-18:
- Subsidies were classified under non-plan expenditures of the government.
- Interest payments and debt servicing were classified under non-plan expenditures of the government.
- Defence expenditures were classified under non-plan expenditures of the government.
Which of the above statements is/are correct?
[A] Only 1
[B] 1 and 2 only
[C] 2 and 3 only
[D] 1, 2 and 3
Show Answer
Correct Answer: D [1, 2 and 3]
Notes:
All three statements are correct. Before 2017-18, the government’s non-plan expenditure included subsidies, interest payments and debt servicing, and defence expenditures. Non-plan expenditures covered routine and obligatory expenses such as salaries, pensions, subsidies, interest, defence outlays, and grants. From 2017-18 onward, the classification was replaced by Revenue and Capital expenditure categories.
10. If a company has “Trade Receivables”, this implies that __:
[A] It has made a sale but yet to collect payments
[B] It has received payments but yet to make a delivery
[C] It has received an order but yet to make delivery
[D] None of the above is a correct definition
Show Answer
Correct Answer: A [ It has made a sale but yet to collect payments ]
Notes:
If a company has receivables, this means it has made a sale but has yet to collect the money from the purchaser.
