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 fertilizer is least likely to affect soil pH?
[A] Urea
[B] Muriate of potash
[C] Rock Phosphate
[D] Ammonia
Show Answer
Correct Answer: B [Muriate of potash]
Notes:
Muriate of potash is a common name for potassium chloride. It is chemically neutral and does not significantly alter soil pH. Farmers use it mainly as a source of potassium. Urea and ammonia may acidify soil with repeated use, while rock phosphate tends to make soil slightly acidic over time. Muriate of potash is widely produced and used worldwide.
2. What is the number of members in the Monetary Policy Committee (MPC)?
[A] 4
[B] 5
[C] 6
[D] 7
Show Answer
Correct Answer: C [ 6 ]
Notes:
Monetary Policy Committee (MPC) committee comprises six members – three officials of the Reserve Bank of India and three external members nominated by the Government of India.
3. Which industry is not part of the Index of Eight Core Industries?
[A] Electricity
[B] Crude Oil
[C] Natural Gas
[D] Pharmaceuticals
Show Answer
Correct Answer: D [Pharmaceuticals]
Notes:
The Index of Eight Core Industries includes Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement, and Electricity. Pharmaceuticals are not included in this index. The Index serves as an indicator for measuring the industrial performance in India, and is released monthly by the Ministry of Commerce and Industry since 2004.
4. Who among the following scholars is associated with Law of Rent?
[A] Richard Jones
[B] Thomas Robert Malthus
[C] David Ricardo
[D] Adam Smith
Show Answer
Correct Answer: C [David Ricardo]
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.
5. In which of the following countries first Stock Exchange opened?
[A] Uk
[B] Netherlands
[C] USA
[D] India
Show Answer
Correct Answer: B [Netherlands]
Notes:
The first stock exchange was in the Netherlands when the Dutch East India Company issued the first shares on the Amsterdam Stock Exchange
6. Expenditures of the central government on flagship development programmes comes under which of the following?
[A] Plan expenditures
[B] Non Plan expenditures
[C] Revenue expenditures
[D] Capital expenditures
Show Answer
Correct Answer: A [Plan expenditures]
Notes:
Plan expenditures refer to the money that is spent by a government or other organization on specific plans or projects. These plans or projects are typically designed to achieve specific goals or objectives, and the plan expenditures are used to fund the activities and operations associated with implementing those plans.
7. Which approach did the Tendulkar Committee use to measure poverty in India?
[A] Calorie-based model only
[B] Comprehensive Poverty Line Basket including health and education
[C] Inequality and growth measures
[D] Vulnerability and mobility analyses
Show Answer
Correct Answer: B [Comprehensive Poverty Line Basket including health and education]
Notes:
The Tendulkar Committee was formed in 2005 and submitted its report in 2009. It shifted poverty measurement from a calorie-based model to a broader Poverty Line Basket approach. This included private expenditure on health and education alongside food and other needs. The committee recommended separate monetary values for rural and urban areas, utilized the Mixed Reference Period data, and made adjustments for price changes based on consumption patterns.
8. The power of banks to expand deposits through lending is called:
[A] Capital Expansion
[B] Credit Expansion
[C] Credit Control
[D] Credit Creation
Show Answer
Correct Answer: D [Credit Creation]
Notes:
Credit creation by commercial banks occurs under the fractional reserve system. Banks keep a part of deposits as reserves and lend the rest. This process increases the total supply of money. The cash reserve ratio (CRR) determines the amount banks must retain. The money multiplier is calculated as 1 divided by the CRR. New loans are redeposited and re-lent, multiplying deposits.
9. Which is the most volatile form of foreign capital?
[A] External Commercial Borrowings
[B] Foreign Direct Investment
[C] Loans from International Financial Institutions
[D] Foreign Portfolio Investment
Show Answer
Correct Answer: D [Foreign Portfolio Investment]
Notes:
Foreign Portfolio Investment refers to investments in securities like stocks and bonds by foreign investors. FPI is highly liquid and can be withdrawn quickly. FPI inflows and outflows are sensitive to global and domestic financial conditions. Sudden withdrawal of FPI causes market volatility. FPI is termed “hot money” compared to FDI, which involves long-term capital commitments. FPI contributed to major capital outflows during financial crises.
10. 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.