Indian Economy MCQs

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Transfer payments made by the Government including subsidies, government aid, social security assistance such as health insurance payment and scholarship are not included in the national income. Because they do not represent any economic activity.

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Substitute goods are those goods which can be used in place of each other. Examples of substitute goods are : tea and coffee; ghee and edible oil. In case of substitute goods like tea and coffee, demand for a commodity falls with a fall in the price of other substitute goods.

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Government spending refers to the money spent by the government or public sector on the acquisition of goods and services such as education, healthcare, social protection, defence etc. It does not come under monetary policy.

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Emissions trading (aka. cap and trade) refers to the market-based approach to control pollution by providing economic incentives for reducing the emissions of pollutants.

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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.

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The Reserve Bank of India mandates a minimum Capital to Risk-Weighted Assets Ratio (CRAR) of 9% for Local Area Banks under the RBI (Local Area Banks–Prudential Norms on Capital Adequacy) Directions, 2025. Local Area Banks are regulated separately from other banking categories as per RBI’s guidelines. These banks are mainly established in rural and semi-urban areas to mobilize rural savings and invest in local economies.

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The Reserve Bank of India regulates foreign currency accounts and remittances for Indian residents. RBI acts under the Foreign Exchange Management Act, 1999 and the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015. Amendments until 2025 empower RBI to set conditions for outward and inward remittance and opening of overseas bank accounts. RBI issues notifications for compliance with FEMA rules.

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The Global Enabling Trade Report is published by the World Economic Forum. The first edition appeared in 2008. The report assesses the policies, institutions, and services facilitating trade globally. The World Economic Forum is headquartered in Geneva, Switzerland, and was established in 1971. The report includes the Enabling Trade Index, which ranks countries based on their trade enabling factors.

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Devaluation reduces the home currency’s value relative to foreign currencies, making exports cheaper for foreign buyers and imports costlier for domestic consumers. This increases export demand and decreases import demand. Higher exports and reduced imports support an improved current account balance. The Marshall-Lerner condition states devaluation is effective if demand elasticities for exports and imports combined exceed one.

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The Public Distribution System distributes subsidized foodgrains to eligible households under the National Food Security Act, 2013. The Food Corporation of India receives government funding for procurement and distribution of grains. Central Issue Prices are set by the government for affordable supply. As of January 2024, free foodgrains are provided to beneficiary households, impacting over 81 crore people.