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 option is an example of Green Field Investment?
[A] Investment in agriculture land for future development
[B] Investment in a new factory complex on undeveloped land
[C] Cleaning and converting an old cement factory to commercial use
[D] Cleaning and converting an old cement factory to residential use
Show Answer
Correct Answer: B [Investment in a new factory complex on undeveloped land]
Notes:
Green Field Investment refers to setting up a new facility on previously undeveloped land. The term is commonly used in foreign direct investment when a parent company builds its operations in a foreign country from scratch. Such investments involve construction of new plants, buildings, and infrastructure, often in areas where no prior facilities exist. This is distinct from Brown Field Investment, which involves modifying or upgrading an existing facility.
2. A competitive firm maximizes its profit when _______?
[A] MR=AR
[B] MR=MC
[C] MC=AC
[D] MC=AR
Show Answer
Correct Answer: B [MR=MC]
Notes:
A competitive firm maximizes its profit when its marginal revenue equals its marginal cost. Marginal revenue is the additional revenue earned by the firm from selling an additional unit of output. When marginal revenue equals marginal cost, the firm is earning the maximum possible profit. The marginal cost of production and marginal revenues are two determinants used to analyze the profitability of the production. When the marginal cost is below the marginal revenue, the firm can increase its revenue by producing more. When a competitive firm maximizes profit, profits are always greater than 0.
3. The trade of Nylon Fibers in India is governed by which ministry?
[A] Ministry of Textiles
[B] Ministry of Chemicals and Fertilizers
[C] Ministry of Petroleum
[D] Ministry of Commerce
Show Answer
Correct Answer: B [Ministry of Chemicals and Fertilizers]
Notes:
Nylon fiber is a synthetic polymer regulated under petrochemicals. The Department of Chemicals and Petrochemicals operates under the Ministry of Chemicals and Fertilizers. The ministry monitors petrochemicals and synthetic fiber industries in India. This ministry administers policies, development, and regulation of nylon production and trade. The department was previously under the Ministry of Petroleum until 1991, then reassigned.
4. Which is NOT a qualitative instrument of credit control in India?
[A] Moral Suasion
[B] Credit Rationing
[C] Cash Reserve Ratio (CRR)
[D] Margin Requirements
Show Answer
Correct Answer: C [Cash Reserve Ratio (CRR)]
Notes:
Cash Reserve Ratio (CRR) is a quantitative instrument set by the Reserve Bank of India under Section 42(1) of the RBI Act, 1934. CRR mandates banks to keep a percentage of deposits with RBI in cash. It controls the total volume of credit by affecting banks’ lending power. Qualitative credit control instruments in India include moral suasion, credit rationing, and margin requirements.
5. Directorate of Marketing and Inspection (DMI) is an attached Office of which among the following ministries?
[A] Ministry of Food Processing
[B] Ministry of Commerce
[C] Ministry of Agriculture
[D] Ministry of Finance
Show Answer
Correct Answer: C [Ministry of Agriculture]
Notes:
The Directorate of Marketing and Inspection (DMI) operates under the Department of Agriculture, Cooperation, and Farmers Welfare, Ministry of Agriculture and Farmers Welfare. It was established in 1935 and serves as the regulatory body responsible for promoting and regulating marketing and quality control of agricultural and allied products in the country.
6. Which of these is NOT an anti-inflationary monetary measure?
[A] Increasing central bank discount rate
[B] Raising Cash Reserve Ratio
[C] Implementing credit rationing policies
[D] Open market purchase of government securities
Show Answer
Correct Answer: D [Open market purchase of government securities]
Notes:
Open market purchase of government securities injects liquidity into the banking system. The Reserve Bank of India buys government securities to increase money supply. This is an expansionary policy used to stimulate economic growth. Anti-inflationary measures contract money supply. RBI uses open market sales, not purchases, to control inflation. Open market operations are conducted under Section 17 of the Reserve Bank of India Act, 1934.
7. UDYAMI helpline is for?
[A] Large capital Industries
[B] Female entrepreneur
[C] Farmers introducing technology in Farming
[D] Micro, small & medium size enterprises
Show Answer
Correct Answer: D [Micro, small & medium size enterprises]
Notes:
Udyami Helpline with number 1800 180 6763 is a Call Centre of Ministry of Micro, Small and Medium Enterprises (MSME), Government of India. It was launched in 2010 to work as a single point facility for MSMEs needing different kinds of information and accessibility of Banks and other MSME-related organisations.
8. In what form do banks maintain the Cash Reserve Ratio (CRR)?
[A] Government Securities
[B] Physical Cash in Hand
[C] Deposits with the Reserve Bank of India
[D] A Combination of Cash and Government Securities
Show Answer
Correct Answer: C [Deposits with the Reserve Bank of India]
Notes:
The Reserve Bank of India requires commercial banks to maintain CRR exclusively as deposits with the RBI. The CRR rate is announced by RBI’s monetary policy. As of June 2024, the CRR for Indian banks is 4.5% of Net Demand and Time Liabilities. No interest is paid by RBI on the CRR amount held. Government securities are held under SLR, not CRR.
9. RBI’s intervention to influence the exchange rate is known as what in India?
[A] Dirty Floats
[B] Managed Floats
[C] Fixed Floats
[D] Market Stabilization Floats
Show Answer
Correct Answer: B [Managed Floats]
Notes:
India has used a managed floating exchange rate regime since 1993. The Reserve Bank of India intervenes in the foreign exchange market to reduce excessive volatility. The exchange rate is mainly market-determined but subject to RBI intervention. The International Monetary Fund describes India’s regime as a managed float. RBI does not follow a fully fixed or fully floating rate policy.
10. The Mutual fund is constituted under the provisions of which of the following acts?
[A] The Securities and Exchange Board Of India Act,1992
[B] RBI Act,1934
[C] Indian Trusts Act,1882
[D] Indian Registration Act,1908.
Show Answer
Correct Answer: C [Indian Trusts Act,1882]
Notes:
The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908.