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. In the capital market, simultaneous purchase and sale of securities to reduce the loss on purchase is known as __?
[A] Arbitrage
[B] Hedging
[C] Trend following
[D] Shorting
Show Answer
Correct Answer: A [Arbitrage]
Notes:
Arbitrage is a type of trade in which a security is simultaneously bought and sold, in different markets. This type of trade takes advantage of the difference in prices of the same financial instrument being offered on different exchanges.
2. In context with the markets, what is dematerialization of securities?
[A] Shortening the time of debt repayment on securities
[B] Electric holding of the shares replacing the paper securities
[C] The price of a shares falling below certain point in the share market
[D] The buyback of shares by a company
Show Answer
Correct Answer: B [Electric holding of the shares replacing the paper securities]
Notes:
Dematerialization of securities refers to the process of converting physical paper certificates of shares into electronic form. This transition allows for easier and faster transactions, reduces the risk of loss or theft, and enhances the efficiency of trading. The practice gained momentum with the advent of electronic trading systems and is now standard in many markets worldwide. For instance, in India, the dematerialization process was facilitated by the introduction of the Depositories Act in 1996, leading to the establishment of depositories like NSDL and CDSL.
3. In context with the Credit Card Business in India, a Hot card refers to ______?
[A] Low Interest Credit Card
[B] Unsolicited Credit Card
[C] Lost Credit Card
[D] Highly Promoted Credit Card
Show Answer
Correct Answer: C [Lost Credit Card]
Notes:
A “Hot card” in the context of credit cards in India refers to a “Lost Credit Card.” When a card is reported lost or stolen, it is immediately flagged as hot to prevent unauthorized transactions. This term is crucial for fraud prevention in the banking sector. In India, the Reserve Bank of India (RBI) mandates that banks must have robust systems to handle such cases efficiently.
4. “Miadi Hundi” is very much similar in features of which of the following?
[A] A post dated Cheque
[B] A demand Draft
[C] A usance Bill of Exchange
[D] A Promissory Note
Show Answer
Correct Answer: C [A usance Bill of Exchange]
Notes:
Miadi Hundi is similar to a usance bill of exchange as both involve a time element for payment. A usance bill specifies a future date for payment, while a Miadi Hundi is a negotiable instrument that also allows for deferred payment. Both are used in trade finance and facilitate credit transactions.
5. Consider the following:
- Foreign Direct Investments
- Foreign Institutional Investments
- American Depository Receipts
- Global Depository Receipts
In context with the “Sources of Foreign Exchange Reserves” which among the above are placed under Portfolio Investment?
[A] 1, 3 & 4
[B] 2, 3 & 4
[C] 1 & 2
[D] 3 & 4
Show Answer
Correct Answer: B [2, 3 & 4]
Notes:
Portfolio investments typically include Foreign Institutional Investments (FII) and American Depository Receipts (ADRs). FIIs are investments made by foreign entities in domestic financial markets, while ADRs represent shares of foreign companies traded on U.S. exchanges. Foreign Direct Investments (FDI) involve direct investment in physical assets, and Global Depository Receipts (GDRs) are similar to ADRs but can be issued in multiple countries. Thus, the correct answer is 2 (Foreign Institutional Investments and American Depository Receipts).
6. The Ad Valorem Tax is applied on which among the following?
[A] The price of commodity
[B] The value added
[C] The advertisement expenditure
[D] The unit of the commodity
Show Answer
Correct Answer: A [The price of commodity]
Notes:
The Ad Valorem Tax is a tax based on the value of a transaction or property. It is commonly applied to the price of commodities, meaning the tax amount varies with the price. For example, property taxes and sales taxes are often ad valorem, calculated as a percentage of the assessed value or sale price. This method contrasts with specific taxes, which are fixed amounts per unit regardless of value.
7. For which among the following purposes, maximum share of the Natural Gas produced in India is used?
[A] Fertilizers
[B] Power Production
[C] Cooking Gas
[D] Industrial Uses
Show Answer
Correct Answer: B [Power Production]
Notes:
Around 60% of the natural gas produced in India is used for Energy purpose. Out of this, maximum amount is used in Power Generation, followed by Industrial Fuel and LPG use. In Non-energy purposes, Maximum amount of Natural Gas is used in India in Fertilizer Industry.
8. Consider the following statements:
1. In comparison to other products, stocks markets offer higher returns and pose higher risks
2. Stock prices are governed by supply and demand
Which among the above is / are correct statements?
[A] Only 1
[B] Only 2
[C] Both 1 & 2
[D] Neither 1 nor 2
Show Answer
Correct Answer: C [ Both 1 & 2 ]
Notes:
Historically, investors earned higher returns from stocks than from other products. As return and risk are correlated, they were also exposed to higher risks. To absorb this risk, you need superior analytical skills, deeper pockets to diversify across the market and essentially, the right attitude to book losses or profits. Intelligent investing in stocks is therefore, never easy. You can buy stocks either in the primary market or in the secondary market. You need to be doubly sure that you are investing in a fundamentally sound company before writing the cheque for an IPO. Buying shares in secondary market can be done only through a registered broker or a sub-broker. Stock markets are places where buyers and sellers of stock meet to trade. The NSE and BSE is the most important exchanges in India. Stock prices change according to supply and demand. There are many factors influencing prices, the most important being earnings. There is no consensus as to why stock prices move the way they do.
9. The steel plants of Durgapur, Bhilai & Rourkela were set up under which of the following five year plans?
[A] First Five Year Plan
[B] Second Five Year Plan
[C] Third Five Year Plan
[D] Fourth Five Year Plan
Show Answer
Correct Answer: B [Second Five Year Plan]
Notes:
Second Five Year Plan of 1956 to 1961 was given Importance to an establishment of heavy industries only. The main thrust of industrial development was on iron and steel,Heavy engineering and fertilizer industries. Three new iron and steel plants were located in Bhilai, Durgapur, and Rourkela.
10. Which of the following is true about NBFC?
[A] NBFC cannot accept demand deposits
[B] NBFCs cannot issue cheques drawn on itself
[C] Deposit insurance facility of DICGC is not available to depositors of NBFCs
[D] All are true
Show Answer
Correct Answer: D [All are true]
Notes:
All the three points mentioned above are true. These points differentiate NBFC and banks
