Indian Economy MCQs

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Complementary goods, defined by their negative cross elasticity of demand, are products whose demand is influenced by one another. When the price of a good declines, the demand for its complementary good rises. Printers need ink cartridges, tea is often consumed with sugar, and mobile phones require SIM cards for operation. However, tea and coffee are substitutes, not complements, as they are consumed separately and often in place of one another, hence they are not complementary goods.

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Inflation reduces currency purchasing power and drives general price increases. Banks respond by raising loan prices due to higher costs, including increased wages and operational expenditures. Central banks often hike interest rates during inflation to control rising prices. Higher interest rates result in increased loan pricing by banks to maintain profit margins.

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Ad valorem tariff is calculated on the basis of the value of the imported good, expressed as a percentage of such value. For example, an ad valorem tariff of 10% on an imported car worth US$ 10000 would lead to a requirement to pay US$ 1000 as customs duty.

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Pump priming refers to the collective measures taken by the governments during recession to simulate the economy during recession. This is done usually by cutting the taxes and increased public spending.

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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 FPI is highly liquid and can be withdrawn quickly.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.

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In case of High-income elasticity of demand, an increase in income is accompanied by a relatively larger increase in quantity demanded for normal goods. Thus, among the given options Car has highest income elasticity of demand.

• Car: A luxury good with high income elasticity; demand rises sharply with an increase in income.
• Milk: A necessity good with low to moderate income elasticity.
• Paddy: A basic necessity and staple food, with very low income elasticity.
• Tobacco: Considered an addictive good with low or even negative income elasticity in some cases, as demand is less income-sensitive.

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The primary market issuance is done either through public issues or private placement. Under Companies Act, 1956, an issue is referred as public if it results in allotment of securities to 50 investors or more. However, when the issuer makes an issue of securities to a select group of persons not exceeding 49 and which is neither a rights issue nor a public issue it is called a private placement.

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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.

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Mumbai Port in Maharashtra is a major center for handling cotton, petroleum, oil, and petrochemical shipments. It serves as a key import point for long staple cotton and machinery for the cotton textile sector. The port’s specialized terminals handle large volumes of petrochemical products. Cotton textile and petrochemical industries have longstanding reliance on Mumbai Port for raw material and export requirements.

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The Engine Division of Hindustan Aeronautics Limited at Sunabeda, near Koraput, Odisha, was established in 1964. It manufactures engines for MiG fighter aircraft, including R11, R25, R29B, and RD-33 series. Since 2007, the facility has produced RD-33 engines for MiG-29 aircraft under license from Russia. Over 1,300 engines have been manufactured at this division.